Climate negotiations take place between countries. Greenhouse gases (GHGs) are calculated by taking into account the GHGs emitted within a country’s borders. Yet, for some countries, substantial shares of their emissions are attributable to the products they export. What might this mean for future negotiations?

Peters and Hertwich started the ball rolling with a broad analysis, and their study of international trade among 87 countries found that, globally, over 5,3-billion tons of carbon dioxide (CO2) is embodied in trade. For individual countries, the share of emissions attributable to exports varies, depending on the size of the economy and on where the country is located. But a pattern that did emerge is that countries that have targets under the Kyoto Protocol – the so-called Annex B countries – are net importers of CO2 emissions. Another finding that shows this is that emissions associated with production are lower than emissions associated with consumption.

For developing countries, it is the other way around. More GHGs are emitted in production than in consumption. China’s share of emissions embodied in exports was calculated at 24,4% by Peters & Hertwich, and those of exports at 6,6%. So the BEET factor – balance of emissions embodied in trade – is 17,8%.

The exact numbers differ – by study and also over time. Slightly different numbers are reported elsewhere. Wang and Watson found 23% of China’s emissions are attributable to export. Peters was involved in a later study (Weber, Peters, Guan and Hubacek), which updated the export share to a third of Chinese emissions (1 700-million tons of CO2) for 2005. Here, they explicitly said that the share was indeed much lower for earlier years. It rose from 12% (230-million tons) in 1987 to 21% (760-million tons) in 2002 – and to a third by 2005.

Clearly, international trade has been a major driver for China’s rapid industrial growth. Wang and Watson point out that this growth has been accompanied by rapid growth in energy demand. China, like South Africa, has a coal-based energy economy. Hence, carbon emissions have also been growing rapidly.

There is no doubt that China is making huge efforts to reduce its energy intensity. China has said that its plans include quadrupling its gross domestic product while only doubling the use of energy. That is a halving of energy intensity. This is backed up by serious plans. China’s eleventh five-year plan sets a goal of reducing energy intensity by 20% as early as 2010. Few industrialised countries have achieved such rates of improvement.

The problem is one of scale dwarfing a relative improvement. It is still a doubling of energy demand and, across 1,3-billion people and an economy that was growing around 10% a year before the financial crisis, that adds up to a lot of energy – and emissions.

China’s emissions are substantial in annual terms, although the country is not the largest emitter, taking into account the historical emissions that have caused climate change, in the first place. Nor will its emissions per capita exceed those of the US for some decades to come. But it is clear that the climate problem will not be solved without developing countries slowing the rate of emissions growth.

That is where the emissions embodied in inter- nationally traded goods have not been given enough attention, argue Wang and Watson. The issue of ‘carbon leakage’ is part of climate negotiations, but, typically, only looks at emissions-intensive industry moving to deve- loping countries without caps. The net emissions embodied in exports and imports – in short, in trade – have not been added into the calculus of allocating GHG allowances.

Modelling emissions embodied in trade is a complex matter, as Peters and Hertwich clearly show. In plain terms, the key factor is the balance of emissions embodied in trade. Emissions embodied in imports are deducted from emissions embodied in exports. (The complexity comes because some imports are used to produce exports, and each country has multiple trading partners – which is when you need a multi- regional input-output model).

China, as the workshop of the world, has a compelling case that consumption in the developed world is driving part of its emissions growth. But there are good reasons not to change the entire basis of negotiations to trade. One is simply that the World Trade Organisation is hardly an inspiring example of achieving quick breakthroughs, given its recent history. Another is that accounting can get messy – will one country’s estimate of exports line up with its trading partner’s estimate of imports? There would be a huge incentive to pass the buck – at least the carbon buck.

This columnist feels that the outcome of the nego- tiations in Copenhagen are unlikely to shift to a trade- or consumption-based system of accounting. What is very relevant, however, is another hot issue – that of border tax adjustments. US legislation is currently considering imposing a levy at the border on imports from developing countries that do not take on a cap on emissions. Guess which country they are mainly thinking of? That’s a bad idea – starting a trade war when trying to solve the most complex environmental- economic challenge of our time. China would rightly argue that this is hypocritical, when a third of its emissions is attributable to products consumed in deve- loped countries.

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