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The Impact of China-EU Trade on Climate Change

  • Yunfeng Yan
  • Laike Yang
  • Jan Priewe
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    International trade has a significant impact on greenhouse gas (GHG) emissions and global climate change. In this respect, trade between China and the European Union, as the world’s two biggest exporters, is critical to the global GHG emission reduction efforts. The EU-15 is committed to reducing its CO2 emissions under the Kyoto Protocol. However, if the EU reaches its pledged targets by importing CO2 intensive products from China, thereby effectively outsourcing its own emissions to an extent of ca 13.6% of EU’s total energy-related CO2 emissions (2006/7); this hollows out and counters the spirit of the EU’s reduction commitment. The paper analyzes CO2 emissions embodied in China-EU trade from 1995-2006. CO2 emissions embodied in China’s exports to the EU and in the EU’s exports to China were highly imbalanced. The CO2 emissions embodied in China’s exports to the EU were 95.04 Mt in 1995 and 532.35 Mt in 2006, accounting for 2.99% and 8.85 % of China’s CO2 emissions respectively. On the other hand, those of the EU’s exports to China were only 5.78 Mt in 1995 and 26.05Mt in 2006, accounting for only 0.17% and 0.73% of the EU’s emissions respectively. The paper also shows that the scale effect caused the increase of emissions embodied in China’s exports to the EU, while the technology effect and the composition effect offset some of the increases. In terms of sectoral composition, the exports from China to the EU in “fabricated metal products, machinery and equipmentâ€, “basic metals and other non-metallic mineral productsâ€, “rubber, plastics products, and other manufacturing†and “chemicals and chemical products†accounted for a substantial proportion of China’s trade-embodied emissions. The paper concludes that the present trend is unsustainable and leads to ever-increasing trade distortions with environmentally counter-productive incentives. Policy responses are needed, first and foremost a continual carbon footprint accounting system between the EU and China. Finally three policy options to gradually lower imbalances and distortions are outlined.

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    File URL: http://finance-and-trade.htw-berlin.de/fileadmin/working_paper_series/wp_02_2011_Yan_Yang_Priewe.pdf
    File Function: First version, 2011
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    Paper provided by Hochschule fuer Technik und Wirtschaft, Berlin in its series Competence Centre on Money, Trade, Finance and Development with number 1102.

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    Length: 17 pages
    Date of creation: Jun 2011
    Date of revision:
    Publication status: Published in Berlin Working Papers on Money, Finance, Trade and Development, June 2011
    Handle: RePEc:mtf:wpaper:1102
    Contact details of provider: Web page: http://finance-and-trade.htw-berlin.de

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    1. Weber, Christopher L. & Peters, Glen P. & Guan, Dabo & Hubacek, Klaus, 2008. "The contribution of Chinese exports to climate change," Energy Policy, Elsevier, vol. 36(9), pages 3572-3577, September.
    2. Erik Dietzenbacher & Bart Los, 1998. "Structural Decomposition Techniques: Sense and Sensitivity," Economic Systems Research, Taylor & Francis Journals, vol. 10(4), pages 307-324.
    3. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    4. Grossman, Gene & Krueger, Alan B, 1992. "Environmental Impacts of a North American Free Trade Agreement," CEPR Discussion Papers 644, C.E.P.R. Discussion Papers.
    5. Shui, Bin & Harriss, Robert C., 2006. "The role of CO2 embodiment in US-China trade," Energy Policy, Elsevier, vol. 34(18), pages 4063-4068, December.
    6. Satoshi Nakano & Asako Okamura & Norihisa Sakurai & Masayuki Suzuki & Yoshiaki Tojo & Norihiko Yamano, 2009. "The Measurement of CO2 Embodiments in International Trade: Evidence from the Harmonised Input-Output and Bilateral Trade Database," OECD Science, Technology and Industry Working Papers 2009/3, OECD Publishing.
    7. Nadim Ahmad & Andrew Wyckoff, 2003. "Carbon Dioxide Emissions Embodied in International Trade of Goods," OECD Science, Technology and Industry Working Papers 2003/15, OECD Publishing.
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