Sneaky carbon leakage problems

I was remarking to my advisor the other day that one thing low-carbon electricity had going for it was that it's hard for international leakage to occur. Leakage is a potential problem in manufacturing in carbon-restricting countries: if reducing the amount of carbon produced in manufacturing a car means that the manufacturing becomes more expensive, then that manufacturing and its attendant jobs may leak out to other countries that haven't chosen to regulate carbon.

But right now, in any reasonably sizable country, electricity pretty much has to be manufactured locally, because we don't have storage and transmission technologies that are efficient enough to make moving electricity long distances economically sensible. It isn't really vulnerable to leakage. You can't ship your electricity production to China, even if you make it more expensive to produce at home.

Efficient long-distance transmission is something that most people see as a useful development for transition to a low-carbon economy, because it increases overall efficiency of the grid (saving emissions directly), increases grid flexibility, and could allow exploitation of otherwise inconveniently located green resources (for instance, parts of Russia are quite sunny and could be prime solar generation sites, but these parts of Russia are largely quite far from the population centers.) I was speculating, however, that an unintended consequence of real advances in efficient long-distance transmission could be to allow for leakage of electricity manufacturing to less carbon-controlled countries.

Another sneaky potential problem pointed out by my Russian renewable energy book is a potential shift of manufacturing of renewables technologies to high-carbon manufacturing sites. Per Overland and Kjaernet:

There is also a more negative scenario, in which Russia instead uses heavily subsidized energy from abundant coal, natural gas or nuclear power to produce renewable energy input factors such as silicon [for solar panels] and hydrogen. Some  Russian actors are already thinking in this direction. For example, the oligarch Oleg Deripaska, who is the main shareholder of the conglomerate Basic Element and the world's biggest aluminum producer Rusal, has aired the idea of establishing polychrystaline silicon production at Sosnovy Bor outside St. Petersburg. The point would be to take advantage of the cheap energy from the nuclear plant located there.

(Overland and Kjaernet, Russian Renewable Energy: The Potential for International Cooperation, 2009)

The larger point here, I suppose, is that transition from a low-efficiency high-carbon economy to a high-efficiency low-carbon environment involves massive shifts in the location of and control over important resources, business interests, and so on. The way those shifts flow through the global economy will be complex and unpredictable - though a lot of those unpredicted outcomes will look like inevitable reactions to existing interest structures once we're analyzing them in hindsight.