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Trade Imbalance and Carbon Emissions

by dvx Fri Dec 23rd, 2005 at 02:20:42 PM EST

from the diaries. -- Jrme

This month has seen two major international conferences, on international trade and global warming. But there has been little attention given to the connections between the two issues.

A recent study analyzes the extent to which international trade has shifted CO2 emissions from the US to China - and how much additional CO2 has been produced in the process. This has implications not just for the US and China, but for the entire Kyoto Protocol.

From a recent study by the US National Center for Atmospheric Research:

Trade Imbalance Shifts U.S. Carbon Emissions to China, Boosts Global Total

The growth of Chinese imports in the U.S. economy boosted the total emissions of carbon dioxide (a primary greenhouse gas) from the two countries by over 700 million metric tons between 1997 and 2003, according to a study published online in the journal Energy Policy. The analysis, prepared by two scientists at the National Center for Atmospheric Research, suggests that American emissions of carbon dioxide in 2003 would have been 6% higher if the United States had manufactured the products that it imported from China. Meanwhile, China's 2003 emissions would have been 14% lower had it not produced goods for the United States.

"These results show the importance of world trade in accounting for the emissions that drive climate change," says Shui Bin, an environmental policy analyst who authored the Energy Policy paper with geochemist Robert Harriss. Their research was supported by the National Science Foundation, NCAR's primary sponsor.

The world's two biggest emitters of greenhouse gases are the United States (about 25% of the global total) and China (about 15%). The Shui and Harriss study implies that the United States is indirectly responsible for even more carbon dioxide than widely perceived.

So: the US is an even more profligate emitter of CO2 than we thought, and is responsible for more emissions than if it had produced all those consumer goods domestically. (And we should note, by the way, that this is just carbon emissions - the marginal production of "classical" pollutants such as sulfur and nitrogen compounds must be disproportionately greater, insofar as we can assume that the lower efficiency is associated with a lower standard of antipollution technology). But what are the implications for other Western nations?

The BBC has also picked up on this study, and explores the implications for Europe's Kyoto signatories in an article. In between citing the facts of the NCAR study, the correspondent describes the issue of "carbon leakage" - the possibility that CO2 emissions that are attributable to Kyoto-signatory consumer states get offshored to China, a non-signatory, distorting the measure of the former's compliance with treaty targets.

This proposition is not undisputed:

Michael Grubb from Imperial College London believes rates of "carbon leakage" are likely to be small.

"The idea that there are leakage effects has been comprehensively discredited," he told the BBC News website.

The Carbon Trust, a UK government-backed company of which Professor Grubb is policy director, has researched the likely impact of emissions trading on European business.

"What people do talk about is 10-15% leakage - that's the Intergovernmental Panel on Climate Change (IPCC) estimate - but those are model-based estimates, and in reality, you don't even get that," he said

"As a reality check, Europe has had more expensive energy than just about everywhere for decades, yet we still produce virtually all our own steel and our own cement."

Professor Grubb also points up the difficulties involved in measuring and calculating emissions according to end user rather than producer.

Now I know that there are people here who can translate "10-15% leakage" into millions of barrels of oil and generally deconstruct this statement better than I can. I would merely note that Grubb's denial of IPCC estimates is unsubstantiated, and that the remark about steel and cement seems to miss the point of trade with China. That last remark sounds to my jaded lay understanding like the most plausible statement of all.

Nevertheless, [NCAR's Dr] Shui Bin is adamant that the global community should have a try; the way carbon emissions are measured currently is flawed, she believes, and could penalise developing countries unfairly.

"The equity issue should be addressed in the Kyoto Protocol," she said, "but the current Protocol is based on a flawed accounting system.

"A country can intentionally or unintentionally decrease its CO2 emissions by reducing its domestic production but increasing its trade.

"Total CO2 emissions would increase, but the current carbon accounting framework will show a decrease."

My wife is demanding that I drink an aperitif with her right now!.

Life sure can be rough sometimes...

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt t gmail dotcom) on Fri Dec 23rd, 2005 at 02:22:06 PM EST
Lucky you!

Thanks for an interesting read.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Dec 23rd, 2005 at 04:20:59 PM EST
[ Parent ]
Thanks for this. I find that leakage very likely - and it seems obvious that one of the things that make China cheaper is the lower cost of enforcement of rules on security and pollution (there may be other costs associated iwht bureacracy and corruption, but that one certainly palys in favor of China).

As to cement and steel, there is the small thing that these goods are very heavy and extremely expensive to transport over long distances - thus made mostly locally everywhere, with a few exceptions for highly specialised goods. Heck, cement is still made right in the middle of Paris (right under my windows) - on the banks of the river.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Dec 23rd, 2005 at 05:25:23 PM EST
Well, there's an easy way to solve it: whack a carbon tax or emissions permit liability on imported goods from non-Kyoto compliant regimes.  That way the externality is removed, and the market will operate at its proper price.

(Unfortunately, the NZ government just gutlessly bowed to pressure from the business and farming sectors and canned its proposed carbon tax.  They still claim they will meet our Kyoto obligations - but with two years to go and no policy, it's difficult to see how).

by IdiotSavant on Fri Dec 23rd, 2005 at 06:06:17 PM EST
[ Parent ]
Just tax land use, extractive industries, energy, fossil fuels, agriculture and fisheries, and reduce income and capital taxes accordingly.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Dec 23rd, 2005 at 06:59:49 PM EST
[ Parent ]
Yes, tax rent i.e. things that are more expensive just because they are physically rarer (and the demand for which will not be less because of the tax). Stirling Newberry has written some interesting diaries about this.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Dec 24th, 2005 at 03:51:54 AM EST
[ Parent ]
Indeed. I guess we're going to have to get used to tainted science within the Kyoto protocol now, as well as from the denial factions.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt t gmail dotcom) on Sun Dec 25th, 2005 at 07:49:22 AM EST
[ Parent ]
Ok, I just had to put this one. A website that encourages people to flash the finger at 4WD (Hummers in particular), take a picture of them flashing it, and then send it for publication on the website:

The website: http://www.fuh2.com/

Submissions received so far:

And here is a sample:

by Alex in Toulouse on Sat Dec 24th, 2005 at 06:43:42 PM EST

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