Fossil fuel supply, leakage and the effectiveness of border measures in climate policy

► CES fuel-supply specification in CGE models can lead to a minimum production quantity for fossil fuels. ► A consequence is that fuel supply elasticities fall to zero with strict emission reduction targets. ► This leads to an increase in exports of fossil fuels to non-coalition regions, which produces leakage there. ► In a constant-elasticity-of-fuel-supply (CEFS) specification these consequences are avoided. ► We choose CEFS as the preferred fuel-supply specification for the model WorldScan.