Offshoring Emissions

The term offshoring emissions refers to the shift of production or services, accompanied by associated emissions, from one territory to another (and not necessarily overseas). Globalization and trade liberalization are viewed as having caused this trend in recent decades. Offshoring of emissions- intensive production or services may also be driven by environmental regulations, which make compliance easier in other countries with less stringent regulations (or no regulations at all). This is of particular interest to international climate policy such as the Kyoto Protocol and the European Union Emissions Trading Scheme (EU ETS), given the differentiated carbon-mitigation responsibilities of developed and developing countries (and sometimes within those groups). Policies can conceivably do more to displace than to reduce emissions, which would call into question net global emissions reduction claims by developed countries.

Offshoring emissions is synonymous with the term carbon leakage, which is a general term encompassing any unintended territorial transfer of emissions activities. The term spillover effects characterizes even more generally unintended effects of environmental mitigation policies and measures on other territories. The positive and negative consequences of spillover are important evaluating elements of environmental policies, particularly for economies that are globally linked through markets and trade, foreign direct investment, and technology and knowledge transfer.

Carbon leakage is a ratio of the carbon dioxide (CO2) emissions increases outside the countries taking domestic mitigation action (resulting from the mitigation policies) to the emissions reductions within the participating countries (again, as a result of the mitigation policies). Carbon leakage over 1 (or 100 percent) indicates that emissions increases elsewhere have offset the reductions intended by the policy, increasing net global emissions. Carbon leakage less than 100 percent refers to a net global decrease in emissions.