CO 2 Embodied in International Trade with Implications for Global Climate Policy

The flow of pollution through international trade flows has the ability to undermine environmental policies, particularly for global pollutants. In this article we determine the CO2 emissions embodied in international trade among 87 countries for the year 2001. We find that globally there are over 5.3 Gt of CO2 embodied in trade and that Annex B countries are net importers of CO2 emissions. Depending on country characteristics--such as size variables and geographic location--there are considerable variations in the embodied emissions. We argue that emissions embodied in trade may have a significant impact on participation in and effectiveness of global climate policies such as the Kyoto Protocol. We discuss several policy options to reduce the impact of trade in global climate policy. If countries take binding commitments as a part of a coalition, instead of as individual countries, then the impacts of trade can be substantially reduced. Adjusting emission inventories for trade gives a more consistent description of a country's environmental pressures and circumvents many trade related issues. It also gives opportunities to exploit trade as a means of mitigating emissions. Not least, a better understanding of the role that trade plays in a country's economic and environmental development will help design more effective and participatory climate policy post-Kyoto.