Analysis on CO2 Emissions Transferred from Developed Economies to China through Trade

• Published date: 01 March 2016
• Date: 01 March 2016
• Author: Shuijun Peng,Wencheng Zhang
• DOI: http://doi.org/10.1111/cwe.12151

68 China & World Economy / 68–89, Vol. 24, No. 2, 2016

©2016 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Analysis on CO2 Emissions Transferred from

Developed Economies to China through Trade

Wencheng Zhang, Shuijun Peng*

Abstract

Based on a global input–output model, this paper investigates the CO 2 emission transfer

between China and developed economies through trade. The results show that approximately

15–23 percent of China’s production-based emissions during 1995 –2009 were induced by

the production of goods and services satisfying final demand in developed economies.

Decomposition of emission transfers shows that trade of intermediate products played a

significant role in emission transfer from developed economies to China. Most developed

economies have consumption-based emission responsibilities that are higher than their

production-based responsibilities, whereas China’s consumption-based responsibility is

significantly lower than its production-based responsibility. We argue that a fair and efficient

carbon accounting approach should take CO2 emission transfers from developed economies

to developing economies into consideration. It is important that China and its developed

trade partners cooperate in reducing emission transfers.

Key words: CO2 emission transfer, consumption-based emissions, multi-regional input –

output model, production-based emissions

JEL codes: C67, F18, Q54, Q56

I. Introduction

The United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto

Protocol allocate carbon emissions to nations using a production-based accounting (PBA)

framework, in which a country is responsible for emissions generated within its borders. At

*Wencheng Zhang, Postdoctoral Researcher, Nankai Institute of International Economics, Nankai

University, Tianjin, China. Email: wenchengzhang86@163.com; Shuijun Peng (corresponding author),

Professor, Department of International Economics and Business, School of Economics, Xiamen University,

Xiamen, China. Email: shuijun_peng@xmu.edu.cn . This paper is supported by the Major Program of the

National Social Science Foundation of China (Grant No. 13&ZD167), the National Natural Science

Foundation of China (Grant Nos. 71373218 and 71073131) and the Program of Social Science Foundation

of Fujian Province (Grant No. 2014C045).

69

CO2 Emissions to China through Trade

©2016 Institute of World Economics and Politics, Chinese Academy of Social Sciences

the same time, according to the principle of “common but differentiated responsibilities, ”

emission caps are set in developed countries, whereas the emissions of developing countries

are, at present, unrestricted. In this context, developed countries may reduce their territorial

emissions by relocating domestic energy-intensive production to developing countries or

increasing their imports of products from developing countries. Indeed, many studies have

discussed the tremendous volume of emissions embodied in the exports of developing

countries to developed countries (Ahmad and Wyckoff, 2003; Peters and Hertwich, 2008a;

Weber et al., 2008; Davis and Caldeira, 2010; Wiebe et al., 2012). Therefore, production-

based carbon accounting is criticized for potential carbon leakage under fragmented climate

policy (Peters, 2008; Peters and Hertwich, 2008b). In addition, production-based

accounting is thought to be unfair to developing countries with huge carbon trade

surpluses (Pan et al., 2008).

Consumption-based accounting (CBA) is considered an alternative that alleviates carbon

leakage (Peters and Hertwich, 2008b; Wiebe et al., 2012). In contrast to PBA, CBA allocates

emissions induced by final demand for goods and services to the country in which the final

demand is located (Peters, 2008). Consumption-based emissions in some economies have

been calculated using various multi-regional input–output (MRIO) models, for instance, in

Peters and Hertwich (2008a), Andrew et al. (2009), Davis and Caldeira (2010) and Wiebe et al.

(2012). These studies find that consumption-based emissions in major developed economies

are much greater than their production-based emissions.

As a developing country, China has become the largest exporter and carbon emitter in

the world.1 Analysis of international carbon emission transfers induced by China ’s trade is

of particular importance (Wang and Watson, 2008). Emissions embodied in China ’s trade

have been analyzed in many studies (Pan et al., 2008; Weber et al., 2008; Lin and Sun, 2010;

Yan and Yang, 2010; Ma and Chen, 2011; Zhang, 2012; Zhao et al., 2014). Some studies

have specifically analyzed emissions embodied in bilateral trade between China and a major

developed country (Li and Hewitt, 2008; Guo et al., 2010; Tan et al., 2013). Most previous

studies used single-regional input–output (SRIO) models and estimated emissions embodied

in imports under the domestic technology assumption (DTA); that is, assuming that the

technology used to produce China’s imports is the same as that used in China. Adopting

the DTA overestimates emissions embodied in China’s imports from developed countries

because production technologies in developed countries are generally much cleaner than

1In the world input–output tables used in the present study, trade data for China only includes trade values of

other economies with Chinese mainland, Hong Kong and Macao, which is consistent with the values reported in

the Chinese national supply and use tables. Therefore, in the present study, China only refers to Chinese mainland,

Hong Kong and Macao in terms of trade data.