Understanding the Risks of Low Carbon Leakage in Clean Energy Transitions

Transitioning to clean energy technologies offers significant economic advantages for countries but also presents the risk of "low carbon leakage," where production may shift to regions with more favorable conditions. Our research project examines potential changes in production and trade patterns for clean energy technologies using an innovative scenario-based analysis.

We combine the global macroeconomic model GINFORS-E with a newly developed gravity trade model and enrich the analysis with socio-political insights using the Multi-Level Perspective (MLP) framework. This augmented approach incorporates quantifiable indicators to define technology expansion paths in an alternative scenario, integrating political and social dynamics. The baseline scenario reflects current national pledges.

Our findings show minimal trade shifts for established technologies like photovoltaics, which face market saturation, while emerging technologies such as hydrogen electrolyzers reveal greater shifts, signaling disruption potential and higher low carbon leakage risks. Although clean technology adoption drives sector-specific changes, macroeconomic impacts are limited by existing market structures and path dependencies. Sensitivity analyses also demonstrate the influence of price changes on trade and production patterns. Expanding this approach to include more technologies and countries is challenging but crucial, given current data limitations.