China's Balance of Emissions Embodied in Trade: Approaches to Measurement and Allocating International Responsibility

Abstract

International trade is characterized not only by the flow of capital and goods, but also by the energy and emissions embodied in goods during their production. This paper investigates the evolving role that Chinese trade is playing in the response to climate change by estimating the scale of emissions embodied in China's current trade pattern and demonstrating the magnitude of the difference between the emissions it produces (some of which are incurred to meet the consumption demands of the rest of the world) and the emissions embodied in the goods it consumes. Estimating China's emissions on a consumption rather than a production basis both lowers its responsibility for carbon-dioxide (CO) emissions in 2006 from 5,500 to 3,840mtCO and reduces the growth rate of emissions from an average of 12.5 per cent p.a. to 8.7 per cent p.a. between 2001 and 2006. The analysis indicates that a reliable consumption-based accounting methodology is feasible and could improve our understanding of which actors and states are responsible for emissions. For example, recent emissions reductions by developed countries may lack credibility if production has merely been displaced to countries such as China. Moreover, in the current institutional context, production methodologies encourage leakages through trade that may do more to displace than to reduce emissions. Both equity and efficiency concerns therefore suggest that emissions embodied in trade should receive special attention in the distribution of post-Kyoto abatement burdens.

Keywords: balance of emissions embodied in trade (BEET), China, consumption-based accounting, pollution haven effect, processing trade, F18, O53, Q54, Q56