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Different carbon prices between regions are likely to persist for many years, but the scale of carbon leakage will not be sufficient to undermine the overall benefits of the EU ETS.
However, leakage will continue to pose a risk in a few key sectors. In these sectors, measures to guard against leakage - production activities shifting outside the EU in response to carbon pricing - will improve the environmental effectiveness and political acceptability of the scheme. But all solutions have their drawbacks and the most appropriate solution will need to be tailored to each sector’s specific situation and be modified over time. The new Carbon Trust report presents alternative solutions to the leakage problem.
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