Outsourced Emissions: Counting Imports Jacks Up U.S., European Greenhouse Gas Totals

The Environmental Protection Agency estimated recently that the United States emitted about 6,946 million tons of carbon dioxide-equivalent greenhouse gases in 2008. Or did it?

According to a study published this week in Proceedings of the National Academy of Sciences, taking a look at what Americans consume as well as what they produce could add more than 10 percent to the total.

Global carbon dioxide emissions are generally measured based on production — if a good is produced in country X, then the associated emissions are blamed on that country. But what if the good is shipped to country Y, and consumed there?

Consumption-based accounting of greenhouse gas emissions paints a different picture of who is to blame for global emissions, and experts say ignoring the consumption side in international treaty negotiations leaves out a huge part of the whole picture.

“Manufacturing goods produces CO2, but where the emissions occur and where the goods are consumed are two different things,” said lead study author Steven J. Davis, of Stanford University’s Carnegie Institution for Science.

“Once all the dust settles and the analysis is done what you see is that there is a large flux of positive trade from developing countries to developed countries like the U.S., Europe and Japan.”

The study by Davis and Ken Caldeira, also of Stanford, looked at what Davis described as the opposite extreme from the currently used production-based emissions scenario. Using comprehensive international trade data from 2004 — the most recently available set — they showed that the United States actually “outsources” 10.8 percent of its consumption-based emissions. In other words, of all the goods the U.S. consumes, more than one-tenth of the greenhouse gases associated with their production actually is emitted elsewhere.

Biggest Exporter

The primary “elsewhere” in question is, not surprisingly, China.

Almost a quarter of China’s emissions from goods produced in the country are actually exported around the world. Many of those exports go to the U.S., but Western Europe is also a big recipient.
And because of limited manufacturing, some European countries actually have among the highest net outsourcing of emissions. Switzerland, for example, outsources more than half of its consumption-based emissions.

This alternate method of accounting for the total amount of greenhouse gases in the atmosphere, while unlikely to be completely adopted by international negotiators, still could affect how global treaties turn out.

“Internationally [consumption-based approaches] could play an interesting role,” said Glen Peters, a senior research fellow at the Center for International Climate and Environmental Research in Oslo, Norway. “They emphasize that rich countries actually have more responsibility for emissions they currently accept. Rich countries can expand their consumption and have the emissions occur in distant lands. They need to acknowledge and address this.

"Consumption-based approaches should not, however, be used by poor countries to get out of emission reductions. Consumption-based approaches should be used to design more efficient policy, not to avoid reducing emissions.”

China, for example, could focus on its huge exported emissions totals — about 1.4 gigatonnes of CO2, dwarfing other major exporters like Russia, at about 0.4 gigatonnes — as a way to avoid responsibility for reducing those emissions.

Jake Schmidt, the international climate policy director at the Natural Resources Defense Council, agreed that both approaches have advantages.

“When China or India or whoever exports goods around the world, they don’t do it for free,” he pointed out. “They are gaining value for that.”

Schmidt added that the complexity involved in consumption-based analyses make them impractical for use in negotiations.

“I think it’s a very good intellectual exercise, but I don’t see it as the basis for a political agreement or a system of strong accounting,” he told SolveClimate. “Our international negotiations are complicated enough, I would hate to try to negotiate on the basis of financial flows and trade.”

Davis said that even though the purely consumption-based side is difficult to implement, there are important lessons to be gleaned from that type of analysis.

“We don’t anticipate the UN going to this sort of model to allocate emissions to consumers,” he said. “I think what the analysis really shows is, if we had a global constraint on carbon, all of these complex interactions that we modeled would come out in the wash. The price of carbon would either be passed on to the consumer or not depending on the market condition. But someone would pay the cost and these interactions would be accounted for.”

Regional Policies, Global Impact

Another important message is that regional climate policies — such as the one still being considered on Capitol Hill — need to acknowledge the fact that goods coming in from elsewhere carry their own greenhouse gas baggage.

“If the U.S. is going to put a cap on emissions but they don’t consider the fact that consumers here can just import goods from places like China that don’t have those kinds of constraints, then any policy that we have will be undermined in terms of its benefits to the climate system,” Davis said. In other words, the climate doesn’t care where the emissions come from.

One reason that consumption-based emissions accounting hasn’t been adopted, at least to some extent, is the degree of difficulty involved with making those calculations. Data on international trade and the emissions associated with the production and transport of goods takes years to put together; the 2004 data set Davis and Caldeira used is the most recently available set, and before that, equivalent data only emerged in 2001 and 1997.

Peters said that the difficulty is not an excuse, though, to ignore one half of an equation.

“Should you base policy on data that is simple to calculate and wrong or base policy which is hard to calculate and right? In practice, I think both emission inventories — production and consumption — are needed as they provide different information.”

And clearly, the consumption-based approach provides a huge chunk of the total information. According to Davis and Caldeira’s paper, fully 23 percent of the 2004 global emissions of greenhouse gases — or 6.2 gigatonnes — were traded internationally.

“Everyone has long acknowledged that climate change is a global problem,” Davis said. “We’re just emphasizing that the solution is going to have to have a global scope too.”

See also:

German Climate Council Proposes ‘Budget Approach’ to Global Emissions

Cradle to Grave: Greenhouse Gas Protocol Adds Up Companies’ Lifecyle Emissions

China Sets 2020 Emissions Target in Interest of National Security