Trade and greenhouse gas emissions

Countries that are short on land and water import wheat from countries that have lots of both. In a way, you can see this as the small dry country ‘importing’ land and water in the conveniently transportable form of edible grains. The conveyance is an indirect one (you do not pay a ‘water surcharge’ on a bag of flour), but differences in relative factor prices can lead to opportunities for universal gains from trade.

Something similar happens with greenhouse gas emissions, though it takes the form of an externality rather than a priced component of a transaction. When manufacturing or primary commodities takes place in one state and the products of those industries are consumed in another, the total emissions in the exporting countries include some component for which the importing country arguably bears moral responsibility. When a Canadian buys an iPod made from Chinese energy and Sudanese oil, it seems fairest to say that the Canadian is responsible for the associated emissions.

A 2003 OECD study attempted to quantify such transfers using data from 1993 to 1998. For that span of time, the United States effectively imported an average of 263 megatonnes of carbon emissions per year: about 5% of their domestic total. China, by contrast, exported about 360 megatonnes: a figure equivalent to 12% of their GHG production. Canada, with all its forest and hydrocarbon industries, apparently exported about 54 megatonnes: about 11% of our emissions during that period.

Trying to calculate these on an ongoing basis and transfer responsibility from makers to buyers is simply impractical. Thankfully, the establishment of a global price for carbon would achieve the same effect without all the paperwork. It doesn’t matter if the tax is imposed at the point of production or the point of consumption. In the former case, producers would pass the cost to consumers anyhow.

Source: Ahmad, Nadim. “A Framework for Estimating Carbon Dioxide Emissions Embodied in International Trade of Goods.”

Author: Milan

In the spring of 2005, I graduated from the University of British Columbia with a degree in International Relations and a general focus in the area of environmental politics. In the fall of 2005, I began reading for an M.Phil in IR at Wadham College, Oxford. Outside school, I am very interested in photography, writing, and the outdoors. I am writing this blog to keep in touch with friends and family around the world, provide a more personal view of graduate student life in Oxford, and pass on some lessons I've learned here. View all posts by Milan