Trade and greenhouse gas emissions


in Economics, Politics, Science, The environment

Painted face portrait

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.”

{ 4 comments… read them below or add one }

R.K. November 20, 2007 at 8:52 am

The difference between water in wheat and CO2 in iPods is that the former is a factor of production with a cost. Also, there is meaningful geographic variation when it comes to water.

CO2 has simply been an afterthought.

Tom November 20, 2007 at 11:00 am

That’s a really nice drawing. Where is it?

Anon November 21, 2007 at 3:00 pm

Made for the USA?
On who is accountable for Chinese greenhouse-gas emissions

The vast majority of the world’s MP3 players are made in China, where the main power source is coal. Manufacturing a single MP3 player releases about 17 pounds of planet-warming carbon dioxide into the atmosphere. iPods, along with thousands of other goods churned out by Chinese factories, from toys to rolled steel, pose a question that is becoming an issue in the climate-change debate. If a gadget is made in China by an American company and exported and used by consumers from Stockholm to São Paulo, Brazil, should the Chinese government be held responsible for the carbon released in manufacturing it?

Milan December 17, 2007 at 12:13 am

Carbon consumption caps: exporting climate policy

By John Whitehead on Climate Change

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