Carbon leakage

Something I don't quite understand. About three weeks ago a member of the UK government appeared on the BBC, proudly claiming that the UK were successfully meeting their carbon targets by exporting manufacturing to China.

Leaving aside the obvious loud Doh! this warrants (where do they get these clowns from?), it also raises the whole question of carbon leakage. Today, for example, the Financial Times reports that industrialists in the EU are threatening to move production to areas where carbon emissions are not yet regulated (India, China, USA, and so on) if they don't get some concessions about targets.

But how have we arrived at a situation where such a threat is possible, or was not foreseen? Can we not require companies registered in the EU to calculate the total carbon cost of their good and services, regardless of where the inputs come from and the outputs go? Presumably not, but if we don't, what hope do we have of controlling emissions.