Who benefits from carbon emissions? Redefining production benefits in the benefit principle

Existing methods for allocating carbon emissions rely on production volumes and consumption, often misaligning emissions with production benefits. This study redefines production benefits as the gains received by factor providers (e.g. wages and profits) rather than those received by producers. We propose a benefit principle that attributes carbon emissions based on both production and consumption benefits. Our findings show that this approach allocates more emissions to developed countries and fewer to developing ones, reveals higher emissions embodied in trade, and highlights distinct national patterns: in India and Iran, emissions attributed to profits exceed those from wages, while China shows higher emissions linked to capital depreciation. These results suggest that climate policies should prioritize developed economies and better address trade-related emissions. Additionally, India and Iran should focus on profit-driven emissions, while China should address capital-related emissions. This method helps reduce allocation disputes and offers broader applicability for allocating other pollutants.