Effects of different EU climate policy scenarios on Austria’s trade and carbon balances

Over the last decades, Austria’s CO2 emissions from domestic production have risen at a considerably slower path than CO2 emissions from domestic consumption due to high emissions embodied in imports. We analyze in a static multi‐sectoral, multi‐regional computable general equilibrium model for Austria, its main trading partners and major world regions, whether this trend will be aggravated or alleviated under different options for climate policy by 2020. When energy intensive sectors are bound by a European wide emissions trading scheme and non‐energy intensive sectors face national reduction targets, Austrian exports decline more than its imports and particularly so in the energy intensive sectors, causing a slight worsening of the trade balance. Since imports rise particularly from outside the EU, Austria’s carbon emissions from production decline compared to the base year, but its emissions from imports fall much less than emissions from exports, leading to a worsening of the carbon balance and an increasing difference between Austria’s production and consumption based emission accounts. When however climate policy is extended towards other industrialized countries, competitiveness of European countries is improved and carbon leakage (to non‐policy regions) is reduced considerably.