Many Republicans fear that serious action to reduce U.S. emissions will be ineffective in the face of growing emissions from China, India, and the rest of the developing world. Last month, a scholar at the American Enterprise Institute published a blog post arguing that to deal with global emissions, the US needs to be willing to coerce Chinese emission reductions. The post reports global CO2 emissions as compiled by the Netherlands Environmental Assessment Agency (NEAA) in 2019. In 2018, China was the biggest CO2 emitter at 11.2 Gt CO2, followed by the United States at 5.25 Gt CO2. Global emissions of all greenhouse gases(GHG) were equivalent to 55.6 GtCO2 (including those from land-use change). Since only global GHG emissions matter for climate outcomes, the argument holds that China needs to be the “first and foremost target” of any approach to climate.
Beyond diplomatic efforts, how can U.S. policy affect Chinese emissions? One way is by looking at emission transfers through international trade. When a Chinese company produces a couch and sells it in the U.S., the couch is part of U.S. consumption, but the emissions from the production count as Chinese. International trade can lead to the transfer of emissions from one jurisdiction to another and might partially explain rising emissions in the developing world.
By analyzing trade data from 1990 to 2008, one PNAS paper suggests that international trade is a significant factor in explaining growing developing world emissions. While many developed countries’ production-based emissions have stabilized, their consumption-based emissions are increasing much faster. More recent analysis shows that China’s net exports of CO2 emissions, as a share of its territorial emissions, has grown from 5.6% in 1990 to 13.9% in 2016. This indicates that China’s increasing net exports to the rest of the world for the last two decades has contributed to the significant growth in its territorial emissions. Meanwhile, the US’s net imports of CO2 emissions as a share of its domestic emissions has increased from 0.5% in 1990 to 7.7% in 2016. In other words, if one looks at the consumption-based emissions of the US, the quantity is 7.7% higher than the production-based emissions in 2016. This country consumes more in emissions than it produces.
If the U.S. were to implement a well-designed carbon tax with a border adjustment mechanism (I explained what a border adjustment is in a previous blog post), then eligible carbon-intensive goods imported from other countries into the U.S. would be subject to the same carbon tax as comparable U.S. domestically produced goods. This would incentivize foreign manufacturers to reduce their carbon emissions if they want to maximize profit margins for their exports to the U.S. It would be a first step to achieving the “first and foremost” goal of reducing foreign emissions.