Toward Consumption-Based GHG Emissions Accounting: From Calculation to Policy-Making

Abstract

In national carbon emissions reduction targets as well as within the international climate change regime, production-based (or territorial) emissions are taken into account. Such accounting imposes the major responsibility for emissions on leading emerging economies where most of the carbon-intensive industries are allocated. It also provokes carbon leakage: stringent climate policies in one jurisdiction may lead to the reallocation of production and corresponding emissions to others where companies bear lower regulation costs. Consequently, asymmetry occurs. While most developed countries gradually reduce their emissions, they are simultaneously growing in emerging economies, with no significant progress in the mitigation of global climate change. This paper directs attention to an alternative way of emissions accounting – based on consumption. In this regard, emissions are attributed to the particular economy if they are embodied in goods consumed there regardless of where exactly these emissions are generated. This type of accounting supposes that emissions of major emerging economies are not their own choice but also the reflection of the international division of labour and the result of demand for carbon-intensive goods coming from major centres of consumption in developed countries. Regular calculation and disclosure of consumption-based emissions (along with production-based ones) and their gradual integration into the process of emissions reduction targetsetting would provide a new perspective on sharing responsibility for emissions, prevent carbon leakage and clearly demonstrate the need for international climate cooperation between exporters and importers of carbon-intensive goods, expand the scope of emissions under regulation, and give opportunities to countries to use the wider range of decarbonization tools. The latter would include those that involve the population in mitigation efforts and better link the price for carbon with the level of household consumption, which is important for coping with carbon inequality and promoting climate justice.