Leakage for small scale projects is defined in 4/CMP.1, Annex II, paragraph 30:
Leakage is defined as the net change of anthropogenic emissions by sources of greenhouse gases which occurs outside the project boundary, and which is measurable and attributable to the CDM project activity (4/CMP.1, Annex II, paragraph 30).
Therefore, leakage refers to the increase in emissions outside the project boundary that occurs as a consequence of the project activity's implementation.
Calculations of emission reductions must be adjusted to take account of leakage, and simplified calculations are available for this purpose for all existing small-scale project types:
Reductions in anthropogenic emissions by sources shall be adjusted for leakage in accordance with the provisions of appendix B for the relevant project categories. The Executive Board shall consider simplification of the leakage calculation for any other project categories added to appendix B (4/CMP.1, Annex II, paragraph 31).
The CDM Glossary of Terms (Version 03) further clarifies that leakage shall only be considered within the boundaries of non-Annex I Parties:
In the cases where leakage is to be considered, it shall be considered only within the boundaries of non-Annex I Parties (CDM Glossary of Terms, Version 03).