China's foreign trade and climate change: A case study of CO2 emissions

The globalization of trade has numerous environmental implications. Trade creates a mechanism for consumers to shift environmental pollution associated with their consumption to other countries. Carbon leakage exerts great influences on international trade and economy. Applying an input-output approach, the paper estimates the amount of carbon dioxide (CO2) embodied in China's foreign trade during 1997-2007. It is found that 10.03-26.54% of China's annual CO2 emissions are produced during the manufacture of export goods destined for foreign consumers, while the CO2 emissions embodied in China's imports accounted for only 4.40% (1997) and 9.05% (2007) of that. We also estimate that the rest of world avoided emitting 150.18 Mt CO2 in 1997, increasing to 593 Mt in 2007, as a result of importing goods from China, rather than manufacturing the same type and quantity of goods domestically. During 1997-2007, the net “additional” global CO2 emissions resulting from China's exports were 4894 Mt. Then, the paper divides the trade-embodied emissions into scale, composition and technical effect. It was found that scale and composition effect increased the CO2 emissions embodied in trade while the technical effect offset a small part of them. Finally, its mechanism and policy implications are presented.