I read an article recently on Grist covering the subject of coal deposits around the world and the hugely troubling issue known as carbon leakage, a stumbling block for both the economy and the climate, with the article going on to detail how this new paper, published in the Journal of Political Economy, could sold the problem once and for all.
At its simplest, carbon leakage is a nasty side-effect of the supply and demand system our capitalist economy runs by, and is a possibility resulting from multiple different ways of dealing with taxing carbon and introducing credits especially. The crux of the issue in regards to this paper, is as follows.
If a ‘climate coalition’, such as the UN or OECD, decides to reduce the demand of coal within its member nations, it is highly likely other non-participating countries will sense the drop in global prices and exploit this readily. Flip this over, and reducing the supply results in practically the same response. Prices will rocket if coalitions cut demand or extraction, ultimately making it much more profitable for said member nations to begin selling coal once again, generating a tidy profit in the process.
“In other words, global fossil-fuel markets are like a big balloon. If one set of countries squeezes consumption or extraction, the balloon just puffs up somewhere else” - David Roberts, Grist