The contribution of trade to production-Based carbon dioxide emissions

Abstract

International trade and emission offshoring can reduce a country's domestic carbon dioxide emissions, helping it to reach emission reduction targets set under the prevailing territorial climate policy frameworks. We ask what is the net contribution of trade to national production-based emissions. Existing metrics (consumption-based emissions and the technology-adjusted balance of emissions embodied in trade) do not answer this question. Based on global multi-regional input-output tables and the domestic technology assumption, we calculate net emission onshoring as the difference between the emissions embodied in gross exports (onshoring) and the emissions avoided by gross imports (offshoring) for 43 countries between 2000–2014. We find that the USA offshores emissions and China onshores emissions; the aggregate trade balance explains this result while the trade composition plays a negligible role in either country. In general there is no cross-country relationship between net offshoring and per-capita income, and neither one between trade specialization in emission-intensive products and per-capita income. The developed countries’ absolute decoupling of economic growth and production-based emissions since 2000 is “genuine” in the sense that it reflects domestic economic developments and is not owed to emission offshoring.