This paper estimates the carbon leakage rate across countries, arguably a key parameter in the international climate policy discussion including on border carbon adjustment, but which remains subject to significant uncertainty. We propose innovations along two lines. First, we exploit recently published data on sector-country-specific changes in energy prices to identify changes in domestic carbon emissions and other flows (rather than the historically limited variation in carbon prices or adherence to international climate agreements). Second, we present a simple accounting framework to derive carbon leakage rates from reduced-form regressions in contrast to existing papers, thereby making our results directly comparable to model-based estimates of carbon leakage. We show that carbon leakage rates differ across countries and could be larger than what existing estimates suggest.
We present estimates of welfare by country for 2007 and 2014 using the methodology of
Jones and Klenow (2016) which incorporates consumption, leisure, mortality and
inequality, and we extend the methodology to include environmental externalities. During
the period of the global financial crisis welfare grew slightly more rapidly than income per
capita, mainly due to improvements in life expectancy. This led to welfare convergence in
most regions towards advanced country levels. Introducing environmental effects changes
the welfare ranking for countries that rely heavily on natural resources, highlighting the
importance of the natural resource base in welfare. This methodology could provide a
theoretically consistent and tractable way of monitoring progress in several Sustainable
Development Goal (SDG) indicators.