The narrowing gap in developed and developing country emission intensities reduces global trade’s carbon leakage

Abstract

AbstractInternational trade affects CO2 emissions by redistributing production activities to places where the emission intensities are different from the place of consumption. This study focuses on the net emission change as the result of the narrowing gap in emission intensities between the exporter and importer. Here we show that the relocation of production activities from the global North (developed countries) to the global South (developing countries) in the early 2000s leads to an increase in global emissions due to the higher emission intensities in China and India. The related net emissions are about one-third of the total emissions embodied in the South-North trade. However, the narrowing emission intensities between South-North and the changing trade patterns results in declining net emissions in trade in the past decade. The convergence of emission intensities in the global South alleviates concerns that increasing South-South trade would lead to increased carbon leakage and carbon emissions. The mitigation opportunity to green the supply chain lies in sectors such as electricity, mineral products and chemical products, but calls for a universal assessment of emission intensities and concerted effort.