CO₂ Emissions Embodied In China's International Trade

Climate change is one of the most enormous challenges to intenational community. The extreme weather is rising and has attracted many organizations and researchers. Countries have made efforts to reduce greenhouse gas (GHG) emissions that may be linked to climate change. The Kyoto Protocol set emission reduction goals for "Annex I" parties and most of them are developed countries. But these countries could reduce their national emissions in many ways, such as the relocation of production abroad, import substitution. If the imports use more CO2 intensive production processes, global emissions could well be higher. Based on literature reviews, this paper analyses China's CO2 emissions embodied in traded goods.Firstly, using Environmental Input-Output Life Cycle Assessment (EIO-LCA), the paper empirically describes the impact of international trade on China's national emissions, with a particular focus on China's carbon intensive sectors. It finds that 10.03%-26.54% of China's annual CO2 emissions are produced during the manufacture of export goods destined for foreign consumers. While the CO2 emissions embodied in China's imports account for only 4.40%-9.05% of those.Secondly, structure decomposition analysis (SDA) helps know the drivers of the trade-embodied emissions. The paper decomposes the trade-embodied emissions into scale, composition and technical effect. It finds that scale and composition effect increased the CO2 emissions embodied in trade while technical effect offset a small part of them. In the end, its mechanism and policy implications are presented. Results indicate that scale effect and composition effect are the primary drivers of emissions embodied in exports. The techonology effect is the main reducing factor. The three effects have the same impact on the emissions embodied in imports.Thirdly, the paper explores the role of trade in emissions by creating an indicator that estimates CO2 emissions related to domestic demand (consumption emiissions), contrarying to the common indicator of emissions associated with domestic production of emissions(production emissions) which used in the Kyoto Protocol. It considers whether the effect of trade on emissions should lead to a change in emissions accounting. Comparing the production emissions and consumption emissions of China and its main trade partners, the paper shows that CO2 emissions generated to satisfy domestic demand in China were lower than emissions related to production, while the developed countries have higher consumption emissions than production emissions.Fourthly, this paper discusses international efforts to mitigate climate change. Several measures to control CO2 emissions are also discussed. Both carbon taxes and emission trading schemes are internalizing the environmental costs of GHG and set a price on emissions. Generally, such domestic climate change policies alter the relative prices of traded goods covered by such schemes and taxes, which may affect conditions for international trade. Therefore, the discussion of the disparities in domestic levels of carbon pricing among countries, and the risk of "carbon leakage" and competiviteness effect will follow. Then, the border tax adjustment (BTA) to counterbalance these disparitie is addressed. The paper discusses the compatibility between BTA and WTO, analyses its impact on China's exports. It finds that it is impossible to establish the legality of border tax adjustment under the law of the WTO, and they will be worse than the global climate negotiation or to the maintenance of normal international trade relations.Finally, the conclusion and policy implications are put forward. Then, it analyses the shortcomings of this study and gives prospects for future research.