Carbon Leakage Due to Energy Price Shock and Implications for Climate Policy
Germany, a big economy with a large industrial sector, has been weathering a major energy price shock since Russia invaded Ukraine in 2022. Both the household and the industrial sectors achieved significant gas savings. Some of these were achieved through carbon leakage as Germany shifted parts of its most energy-intensive industrial production abroad. Policymakers need to even more align domestic and foreign policy instruments in accordance with international climate protection goals as more energy-intensive production has moved abroad.