Editing IPCC:AR6/WGIII/Chapter-2 (section)

=== 2.3.4 Emissions Embodied in Trade (EET) ===

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As global trade patterns have changed over recent decades, so have emissions embodied in trade (EET) (Jiang &amp; Green 2017). EET refers to emissions associated with production of traded goods and services and is equal to the difference between PBEs and CBEs ( [[#Wiebe--2016|Wiebe and Yamano 2016]] ). EET includes two parts: emissions embodied in imports (EEI); and emissions embodied in exports (EEE). For a given country or region with CBEs higher than PBEs, it is a net importer with a higher EEI than EEE, and vice versa.

EET have been rising faster since the 1980s due to an increase in trade volume ( [[#Xu--2014|Xu and Dietzenbacher 2014]] ; [[#Wood--2018|Wood et al. 2018]] ). CO 2 emissions from the production of internationally traded products peaked in 2006 at about 26% of global CO 2 emissions. Since then, international CO 2 emissions transfers declined but are likely to remain an important part of the climate policy agenda ( [[#Wood--2020a|Wood et al. 2020a]] ). About 24% of global economic output and 25% of global CO 2 emissions are embodied in the international trade of goods and services as of 2014 ( [[#Hubacek--2021|Hubacek et al. 2021]] ).

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==== 2.3.4.1 Net Emission Transfers ====

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Located downstream in global supply chains, developed countries (mostly in Western Europe and North America) tend to be net emission importers, that is, EEI are larger than EEE. For example, over 40% of national CO 2 footprints in France, Germany, Italy, and Spain are from imports ( [[#Fan--2017|Fan et al. 2017]] ). Developing countries tend to be net emission exporters with higher PBEs than their CBEs ( [[#Peters--2011a|Peters et al. 2011a]] ), especially for Asia and Pacific (as shown in Figure 2.15). That is to say, there is a net emission transfer and outsourcing of carbon-intensive production from developed to developing economies via global trade ( [[#Jiang--2018|]] [[#Jiang--2018|Jiang et al. 2018]] ), mainly caused by cheap labour costs ( [[#Tate--2017|Tate and Bals 2017]] ) and cheap raw materials ( [[#Mukherjee--2018|Mukherjee 2018]] ). Increasing openness to trade ( [[#Fernández-Amador--2016|Fernández-Amador et al. 2016]] ) and less stringent environmental legislation (acting as so-called pollution havens) are also possible reasons ( [[#Hoekstra--2016|Hoekstra et al. 2016]] ; [[#Malik--2016|Malik and Lan 2016]] ; [[#Banerjee--2020|Banerjee and Murshed 2020]] ).

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[[File:10d6b78ee6ba746ec370c66c51e6b5d7 IPCC_AR6_WGIII_Figure_2_15.png]]

'''Figure 2.15''' '''|''' '''Total annual CO''' 2 '''emissions for 116 countries by global region based on consumption- and production-based emissions.''' The shaded areas are the net CO 2 trade balances (differences) between each of the regions. Yellow shading indicates that the region is a net importer of embodied CO 2 emissions, leading to consumption-based emission estimates that are higher than traditional territorial emission estimates. Blue shading indicates the reverse. Production-based emissions are collected from EDGAR and consumption-based emissions from the Global Carbon Budget 2020 ( [[#Friedlingstein--2020|Friedlingstein et al. 2020]] ). Source: this figure is modified based on [[#Hubacek--2021|Hubacek et al. (2021)]] .

Net emissions transferred between developing and developed countries peaked at 7.3% of global CO 2 emissions in 2006 and then subsequently declined ( [[#Wood--2020a|Wood et al. 2020a]] ). The main reason for the decline was an improvement in the carbon intensity of traded products, rather than a decline in trade volume ( [[#Wood--2020a|Wood et al. 2020a]] ). Despite continued improvements, developing economies tend to have higher emission intensity than developed economies due to less efficient technologies and a carbon-intensive fuel mix ( [[#Jiang--2017|Jiang and Guan 2017]] ).

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==== 2.3.4.2 Geographical Shifts of Emissions Embodied in Trade ====

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With the rapid growth of developing countries, the geographical centre of global trade as well as emissions embodies in trade is changing. The fast growth of Asian countries is shifting the global trade centre from Europe to Asia ( [[#Zhang--2019|Zhang et al. 2019]] ). Asian exports in monetary units increased by 235% from 1996 to 2011, and its share in global exports increased from 25% to 46%, whereas Europe’s share in global exports decreased from 51% in 1996 to 39% in 2011. After 2011, global trade has stalled, but Asia’s share of global exports further increased to 42% in 2020 ( [[#UNCTAD--2021|UNCTAD 2021]] ).

In addition to changes in trade volume, trading patterns have also been changing significantly in Asian countries. These countries are replacing traditional trading hubs (such as Russia and Germany) due to the fast growth in trade flows, especially with countries of the Global South ( [[#Zhang--2019|Zhang et al. 2019]] ). The largest geographical shifts in trade-embodied emissions between 1995 and 2011 occurred in high-tech, electronics, and machinery ( [[#Malik--2016|Malik and Lan 2016]] ; [[#Jiang--2018|]] [[#Jiang--2018|Jiang et al. 2018]] ). For example, China is shifting its exports to include more low-carbon and higher value-added goods and services. As a result, China’s exported emissions declined by 20% from 2008 to 2015 ( [[#Mi--2018|Mi et al. 2018]] ).

Developing countries are increasingly playing an important role in global trade. EET between developing countries, so-called South-South trade, has more than doubled between 2004 (0.47 Gt) and 2011 (1.11 Gt), which is seen as a reflection of a new phase of globalisation ( [[#Meng--2018|Meng et al. 2018]] ). Developing countries, therefore, have gained importance as global suppliers of goods and services and have also become more relevant as global consumers as they grow their domestic demand ( [[#Fernández-Amador--2016|Fernández-Amador et al. 2016]] ). Since 2014, CO 2 emission transfer between developing countries has plateaued and then slightly declined and seems to have stabilised at around the same level of transfers between non-OECD and OECD countries at around 2.4 GtCO 2 yr –1 ( [[#Wood--2020a|Wood et al. 2020a]] ). In both cases, a decrease in carbon intensity of trade just about offset increased trade volumes ( [[#Wood--2020a|Wood et al. 2020a]] ).

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