Hiilivuoto valikoitumisongelmana: yritysten jakautuminen alueiden välillä ja hyvityspolitiikkojen suunnittelu.

This thesis examines carbon leakage, the phenomenon in which firms shift production to regions with weaker climate policy to avoid the costs associated with carbon pricing. While carbon taxes and emissions trading systems reduce emissions by putting a price on carbon, unilateral policy can also change where production takes place, causing emissions, jobs, and output to “leak” abroad. A central argument of this thesis is that leakage is fundamentally a selection problem: firms are not identical, and differences in baseline emissions intensity, abatement costs, and relocation costs determine which firms relocate when carbon pricing tightens. To study this mechanism, the thesis applies the Roy model of self-selection to firms’ location choices. The framework delivers a simple threshold rule in which a firm relocates when its carbon-price exposure exceeds its firm-specific cost of moving. Under joint heterogeneity in emissions intensity, abatement efficiency, and mobility, the model characterises not only the overall extent of leakage but also the composition of movers and stayers. This composition matters for policy: the environmental and welfare consequences depend on whether regulation pushes out high-emission firms, low-cost abaters, or primarily the most mobile firms. The thesis then evaluates common leakage-mitigation instruments—output-based rebating and benchmark-based schemes that condition rebates on emissions performance. In the simpler cases, these policies map directly into the selection framework by shifting the relocation threshold and changing how firm characteristics load into the relocation incentive. For more complex emissions-based designs, the selection rule becomes nonlinear, so the thesis complements theory with simulations calibrated to match output protection for a representative firm. Across a range of heterogeneity scenarios, the results show that no single policy dominates: some schemes are robust at limiting relocation but weak on emissions, while others reduce emissions more strongly but require larger fiscal transfers. Overall, the thesis highlights that effective leakage policy must be designed around firm heterogeneity and selection, and that empirical work to pin down the key parameters governing exposure and mobility is essential for credible policy evaluation.