Editing IPCC:AR6/WGIII/Chapter-1 (section)

=== 1.4.2 Trade, Consumption and Leakage ===

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Emissions associated with international trade account for 20–33 % of global emissions, as calculated using multi-regional input-output analysis ( [[#Wiedmann--2018|Wiedmann and Lenzen 2018]] ). Whether international trade drives an increase or decrease in global GHG emissions depends on the emissions intensity of traded products as well as the influence of trade on relocation of production, with studies reaching diverse conclusions about the net effect of trade openness on CO 2 emissions ( [[IPCC:Wg3:Chapter:Chapter-2#2.4|Section 2.4]] .5). Tariff reduction of low-carbon technologies could facilitate effective mitigation ( [[#de%20Melo--2014|de Melo and Vijil 2014]] ; [[#Ertugrul--2016|Ertugrul et al. 2016]] ; [[#Islam--2016|Islam et al. 2016]] ; [[#WTO--2016|WTO 2016]] ).

The magnitude of carbon leakage (see Glossary) caused by unilateral mitigation in a fragmented climate policy world depends on trade and substitution patterns of fossil fuels and the design of policies ( [[#IPCC--2014a|IPCC 2014a]] , Box 5.4), but its potential significance in trade-exposed energy-intensive sectors ( [[#Bauer--2013|Bauer et al. 2013]] ; [[#Carbone--2017|Carbone and Rivers 2017]] ; [[#Naegele--2019|Naegele and Zaklan 2019]] ) can make it an important constraint on policy. See [[#13.6.6.1|Section 13.6.6.1]] in [https://www.ipcc.ch/report/ar6/wg3/chapter/chapter-13 Chapter 13] for channels and evidence. [[#Akimoto--2018|Akimoto et al. (2018)]] argue that differences in marginal abatement costs of NDCs could cause carbon leakage in energy-intensive, trade-exposed sectors, and could weaken effective global mitigation.

Policy responses to cope with carbon leakage include border carbon adjustment (BCAs) and differentiated carbon taxes ( [[#Liu--2020|Liu et al. 2020]] ). Some BCA options focusing on levelling the cost of carbon paid by consumers on products could be designed in line with the WTO ( [[#Ismer--2016|Ismer et al. 2016]] ), while others may not be ( [[#Mehling--2019|Mehling et al. 2019]] ). All proposals could involve difficulty of tracing and verifying the carbon content of inputs ( [[#Onder--2012|Onder 2012]] ; [[#Denis-Ryan--2016|Denis-Ryan et al. 2016]] ). An international consensus and certification practice on the carbon content would help to overcome WTO compatibility ( [[#Holzer--2014|Holzer 2014]] ). See [https://www.ipcc.ch/report/ar6/wg3/chapter/chapter-13 Chapter 13] and [[#Mehling--2019|Mehling et al. (2019)]] on the context of trade law and the PA.

Official inventories report territorial emissions, which do not consider the impacts embodied in imports of goods. Global supply chains undoubtedly lead to a growth in trade volumes ( [[#Federico--2017|Federico and Tena-Junguito 2017]] ), alternative methods have been suggested to account for emissions associated with international trade, such as shared responsibility ( [[#Lenzen--2007|Lenzen et al. 2007]] ), technology-adjusted consumption-based accounting ( [[#Kander--2015|Kander et al. 2015]] ), value-added-based responsibility ( [[#Piñero--2019|Piñero et al. 2019]] ) and exergy-based responsibility based on thermodynamics ( [[#Khajehpour--2019|Khajehpour et al. 2019]] ). Consumption-based emissions (i.e., attribution of emissions related to domestic consumption and imports to final destination) are not officially reported in global emissions datasets but data has improved ( [[#Tukker--2013|Tukker and Dietzenbacher 2013]] ; [[#Afionis--2017|Afionis et al. 2017]] ). This analysis has been used extensively for consumption-based accounting of emissions, and other environmental impacts ( [[#Wiedmann--2018|Wiedmann and Lenzen 2018]] ; [[#Malik--2019|Malik et al. 2019]] ) ( [[IPCC:Wg3:Chapter:Chapter-2#2.3|Section 2.3]] ).

Increasing international trade has resulted in a general shifting of fossil fuel-driven emissions-intensive production from developed to developing countries ( [[#Arto--2014|Arto and Dietzenbacher 2014]] ; [[#Malik--2016|Malik and Lan 2016]] ), and between developing countries ( [[#Zhang--2019|Zhang et al. 2019]] ). High-income developed countries thus tend to be net importers of emissions, whereas low/middle-income developing countries net exporters ( [[#Peters--2011|Peters et al. 2011]] ) (Figure 1.2c, d). This trend is shifting, with a growth in trade between non-OECD countries ( [[#Meng--2018|Meng et al. 2018]] ; [[#Zhang--2019|Zhang et al. 2019]] ), and a decline in emissions intensity of traded goods ( [[#Wood--2020b|Wood et al. 2020b]] ).

The Paris Agreement primarily deals with national commitments relating to domestic emissions and removals, hence emissions from international aviation and shipping are not covered. Aviation and shipping accounted for approximately 2.7% of greenhouse gas emissions in 2019 (before COVID-19); see [[#10.5.2|Section 10.5.2]] for discussion. In addition to CO 2 emissions, aircraft-produced contrail cirrus clouds, and emissions of black carbon and short-lived aerosols (e.g., sulphates) from shipping are especially harmful for the Arctic ( [[#10.8|Section 10.8]] and Box 10.6).

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