EXECUTIVE REPORT SEPT 2018 THE CARBON IN CLIMATE POLICY. Quantifying the Embodied Carbon in Traded Products

Transcription

1 1 EXECUTIVE REPORT SEPT 2018 THE CARBON IN CLIMATE POLICY Quantifying the Embodied Carbon in Traded Products

2 2 Introduction One-quarter of all global greenhouse gas emissions are caused by the manufacture of products destined for export and are not accounted for in most nations climate policies. If left unchecked, the carbon loophole could derail international climate efforts. This gap in global climate policy, which we refer to as the carbon loophole, is large enough to negate or reverse reported progress on climate change in many nations. Without interventions to ensure proper accounting of this embodied carbon, these emissions may continue to grow even as many individual countries succeed in reducing their domestic emissions. For example, many reported achievements of developed countries under the Kyoto Protocol are actually emissions that have been outsourced to developing countries.

3 3 Pollution is growing in many producer nations, even as consumer nations work to meet their climate commitments. The carbon loophole the international flow of greenhouse gas emissions associated with traded products is a growing issue for global efforts to decarbonize the world economy. This research updates previous studies of embodied carbon emissions in internationally-traded products, and quantifies in detail the amount of emissions that pass through the carbon loophole in imported goods. Our findings relied on data from the Eora global supply chain database, which details the transactions, both domestic and foreign, linking millions of supply chains in 15,000 sectors across 189 countries. Top Embodied CO2 Importers in 2015 Top Embodied CO2 Exporters in 2015 U.S.A. China Japan Germany U.K. Hong Kong France South Korea India Italy China U.S.A Russia India Germany Japan South Korea Cananda Taiwan Saudi Arabia Embodied CO2 in Gigatonnes Embodied CO2 in Gigatonnes

4 4 A Snapshot Of The Top 20 Global Flows of Embodied CO Highest emissions per capita Lowest emissions per capita No data Unit: Million Metric Tonnes RUSSIA CANADA 89 SOUTH KOREA U.K GERMANY FRANCE JAPAN 52 U.S.A. INDIA 95 MEXIC CHINA HONG KONG 70 Map shows global flows of carbon from producer to consumer nations in Countries are colored according to CO 2 emissions per capita, net of carbon imports

5 5 Our embodied emissions model looked at millions of data points across 189 countries and 15,000 economic sectors. The top five countries with the largest carbon loopholes, on both the consumption and production side, are China, the United States, Japan, Germany, and the United Kingdom. But virtually every nation is currently experiencing a carbon loophole effect. China, while slowing down as the world s factory, is still by far 36 the biggest exporter of embodied carbon emissions. Meanwhile, embodied emissions from India have 39 grown rapidly, with the U.S. as the largest recipient of embodied emissions in Indian goods. RUSSIA SOUTH KOREA A Snapshot of the Top 20 Flows of Embodied CO 2 in the South-South Trade BELARUS Highest emissions per capita Lowest emissions per capita No data Unit: Million Metric Tonnes BRAZIL UKRAINE TURKEY 231 U.A.E. 35 CHINA 29 INDIA JAPAN TAIWAN HONG KONG 34 SINGAPORE INDONESIA 32 AUSTRALIA

6 6 The Rise of South-South Trade Makes the Loophole Bigger The loophole predominantly affects the world s advanced economies. Our results show that, in recent years, the loophole appears to have largely stabilized in these countries, but there is a rapid rise of embodied carbon flows in fast-growing South-South trade. If left unchecked, these growing flows, coupled with continued stable carbon imports in advanced economies, could seriously derail and undermine international climate policy efforts. South-South Trade of Emobodied CO 2 in Exporters 4.0 Gt CO

7 7 Key Products: Steel and Cement While virtually all traded goods carry with them some embodied carbon emissions, two goods in particular stand out as both heavily-traded and carbon-intensive: steel and cement. The steel and cement sectors together represent over 10 percent of global anthropogenic CO 2 emissions. This report looks closely at the embodied carbon associated with the international trade of these two products. The steel and cement sectors together represent over 10% of global CO 2 emissions. We find that steel and clinker (a carbon-intensive ingredient in most cements) are mostly traded across very long distances outside of their region of production; half of the cement trade is also extra-regional. In addition, world clinker trade has an embodied carbon footprint almost equal to that of cement itself.

8 8 Climate Policy Should Close the Carbon Loophole Unless consumption-based CO 2 accounting is adopted as a core component of climate policy, countries may take advantage of the carbon loophole to meet their Paris Agreement and future negotiated climate targets. This has already occurred with the Kyoto Protocol targets: Multiple nations met their Kyoto targets by reporting on domestic (territorial) emissions while taking advantage of the carbon loophole to grow their total carbon footprint. In this report, we present a current, state-of-the-art overview that tracks these traded CO 2 emissions embodied in internationally-traded goods. We also propose a way forward for regularly updating these results, which will help bolster and improve promising new climate policies that close the carbon loophole, such as California s Buy Clean law, the Netherlands government procurement policy, and similar efforts gaining momentum across the private sector. Gt CO Globally, about 10 gigatonnes, or 25%, of emissions pass through the carbon loophole each year Embodied Emissions in Trade Non-traded Emissions Embodied Emissions as % of Total 0 0% % 30% 25% 20% 15% 10% 5% On average, one quarter of the global carbon footprint is embodied in imported goods. These hidden flows evade most types of carbon policy. Kyoto Protocol was enacted in 1997 China joined WTO in 2001 Economic Crisis in

9 9 Read The Full Report The Carbon Loophole Report presents the latest available data (sourced from the Eora model with data year 2015, presented for the first time in this report) to present a current and state-of-the-art overview tracking traded emissions. The Eora model provides an economic accounting method to document the financial flows between sectors, by using input-output analysis to detail the transactions. It also paves the way for regular updates in analysis of the carbon loophole in the future. Visit BuyClean.org to download the full report. Report Contributors Daniel Moran KGM & ASSOCIATES Ali Hasanbeigi GLOBAL EFFICIENCY INTELLIGENCE Cecilia Springer GLOBAL EFFICIENCY INTELLIGENCE