Pollution embodied in trade: The Norwegian case

With the increase in international trade, it is becoming increasingly important to accurately determine environmental impacts resulting from pollution embodied in trade. Many previous studies have unrealistically assumed that imports are produced with the technology of the importing country. For countries with diverging technology and energy mixes the likely errors are significant. This study uses a model that explicitly includes regional technology differences to the case of Norway. It is found that CO2CO2 emissions embodied in imports was 67% of Norway's domestic emissions. Around a half of this embodied pollution originates in developing countries, yet they represent only 10% of the value of Norwegian imports. In addition the carbon leakage from non-Annex I countries was at least 30%. We then argue that basing emission inventories on consumption, rather than production, may resolve not only issues related to international trade, but also provide greater flexibility towards pollution intensive resource endowments, emission reductions, and participation levels.