CO2 Emissions embodied in China's Trade and Reduction Policy Assessment

China is the world’s largest emitter of carbon dioxide (CO2) and is one of the world’s largest exporters. In 2007, CO2 emissions embodied in China’s net exports totaled 1176 million metric tons (mmt), accounting for 22% of China’s CO2 emissions. We calculate CO2 emissions embodied in China’s net exports using the latest release of a multi-regional input-output database developed by the Global Trade Analysis Project (GTAP 8). We find that the majority of China’s export-embodied CO2 is associated with production of machinery and equipment rather than products traditionally classified as energy intensive, such as steel and aluminum. The largest net recipients of embodied CO2 emissions from China include the EU (360 mmt), the US (337 mmt) and Japan (109 mmt). We also develop a global general equilibrium model with energy and CO2 emissions detail. We use the model to analyze the impact of a sectoral shift from energy-intensive industry to services and a tax on energy-intensive exports, which reflect policy objectives in China’s Twelfth Five-Year Plan (2011-2015) on CO2 emissions embodied in China’s net exports and on global CO2 emissions. We find that while both policies reduce China’s export-embodied CO2 emissions, global there is only a small change in global CO2 emissions.