International trade undermines national emission reduction targets: New evidence from air pollution

Many developed countries in Annex B of the Kyoto Protocol have been able to report decreasing emissions, and some have officially fulfilled their CO2 reduction commitments. This is in part because current reporting and regulatory regimes allow these countries to displace emissions intensive production offshore. Using a new highly detailed account of emissions embodied in international trade we investigate this phenomenon of emissions leakage. We independently confirm previous findings that adjusting for trade, developed countries emissions have increased, not decreased. We find that the sectors successfully holding or lowering their domestic emissions are often the same as those increasing their imports of embodied CO2. We also find that the fastest growing flow paths of embodied CO2 largely originate outside the Kyoto Annex B signatory nations. Finally, we find that historically the same phenomenon of emissions displacement has already occurred for air pollution, with the result that despite aggressive legislation in major emitters total global air pollution emissions have increased. If regulatory policies do not account for embodied imports, global emissions are likely to rise even if developed countries emitters enforce strong national emissions targets.