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What are the unintended consequences of well-intended investments – the “spillover effect”?

Imagine you buy a forest or a logging concession to protect the trees instead of cutting them. 

Great, right? But here’s the catch: the company that sold you the land might now cut down a different forest to meet the same demand for timber. The emissions you thought you avoided simply shifted elsewhere. This is called “leakage.”

Leakage is a risk in other sectors, too. What if you shut down a coal mine, but instead the coal now simply originates from a different mine?

What if you sell your “dirty” assets as part of a decarbonsiation strategy, but these dirty assets just end up wih a new owner?

Leakage creates a paradox: Saving one forest can inadvertently drive deforestation in another, especially if the root economic drivers—like demand for timber or farmland—remain unchecked. Worse still, the displaced deforestation might target even more vulnerable ecosystems.

Likewise, if you sell your coal plant in a well-intended effort to decarbonise your assets, the same coal plant may end up in the hands of an investor, who cares less about the environment than you did.

How to address the leakage paradox?

In this series, two leading authorities in carbon uncover the secrets and contradictions of an entire industry – in the most fun and engaging way. Through 24 curated Carbon Paradoxes, you'll learn everything essential about this field, starting with the tensions we must address to make environmental markets thrive.

This article is also published on carbonparadox.org. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.