The role of technology in avoiding leakage from unilateral mitigation targets in agriculture: the case of the EU

The effectiveness of unilateral greenhouse gas mitigation efforts has been put in doubt due to the so called carbon leakage effect both for industrial and agricultural sectors. In such scenario production shifts to world regions with no carbon constraint and the region which has imposed the carbon constraint substitutes its former domestic production by imports of these now relatively cheaper products, reducing economic activity but not changing consumption bundles. In this paper we investigate how technology can dampen this effect. For this we use the CAPRI partial equilibrium model of the EU agriculture together with its global spatial multi-commodity model calculating endogenously GHG emission coefficients for nitrous oxide and methane following the IPCC guidelines. For the rest of the world we use emission intensities calculated for the past based on emission and production data. Technology is modelled considering trend functions for the emission intensities in the rest of the world which are continued into the future. Our results show that while leakage exists and is increasing with the stringency of the GHG mitigation target of the EU, it can be mostly offset by allowing the ROW to adopt better technologies. To maximize its impact on reducing carbon leakage, technology transfer should focus on meat commodities and the Asia and Central and South American regions.