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Consumption-based carbon accounting: Does it have a future?

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Internationally, allocation of responsibility for reducing greenhouse gas emissions is currently based on the production‐based ( PB ) accounting method, which measures emissions generated in the place where goods and services are produced. However, the growth of emissions embodied in trade has raised the question whether we should switch to, or amalgamate PB accounting, with other accounting approaches. Consumption‐based ( CB ) accounting has so far emerged as the most prominent alternative. This approach accounts for emissions at the point of consumption, attributing all the emissions that occurred in the course of production and distribution to the final consumers of goods and services. This review has a fourfold objective. First, it provides an account of the logic behind attributing responsibility for emissions on the basis of consumption instead of production. Issues of equity and justice, increased emissions coverage, encouragement of cleaner production practices, and political benefits are considered. Second, it discusses the counterarguments, focusing in particular on issues of technical complexity, mitigation effectiveness, and political acceptability. Third, it presents the spectrum of implementation possibilities—ranging from the status quo to more transformative options—and considers the implications for international climate policy that would accrue under various scenarios of adopting CB accounting in practice. Fourth, it looks at how CB accounting may be adjusted to fit with current political realities and it identifies policy mechanisms that could potentially be utilized to directly or indirectly address CB emissions. Such an approach could unlock new opportunities for climate policy innovation and for climate mitigation. WIREs Clim Change 2017, 8:e438. doi: 10.1002/wcc.438 This article is categorized under: Climate Economics > Economics of Mitigation
Advanced Review
Consumption-based carbon
accounting: does it have a future?
Stavros Aonis,*Marco Sakai, Kate Scott, John Barrett and Andy Gouldson
Edited by Stéphane Hallegatte, Domain Editor, and Mike Hulme, Editor-in-Chief
Internationally, allocation of responsibility for reducing greenhouse gas emis-
sions is currently based on the production-based (PB) accounting method,
which measures emissions generated in the place where goods and services
are produced. However, the growth of emissions embodied in trade has raised
the question whether we should switch to, or amalgamate PB accounting, with
other accounting approaches. Consumption-based (CB) accounting has so far
emerged as the most prominent alternative. This approach accounts for emis-
sions at the point of consumption, attributing all the emissions that occurred
in the course of production and distribution to the nal consumers of goods
and services. This review has a fourfold objective. First, it provides an account
of the logic behind attributing responsibility for emissions on the basis of con-
sumption instead of production. Issues of equity and justice, increased emis-
sions coverage, encouragement of cleaner production practices, and political
benets are considered. Second, it discusses the counterarguments, focusing in
particular on issues of technical complexity, mitigation effectiveness, and politi-
cal acceptability. Third, it presents the spectrum of implementation
possibilitiesranging from the status quo to more transformative optionsand
considers the implications for international climate policy that would accrue
under various scenarios of adopting CB accounting in practice. Fourth, it
looks at how CB accounting may be adjusted to t with current political reali-
ties and it identies policy mechanisms that could potentially be utilized
to directly or indirectly address CB emissions. Such an approach could
unlock new opportunities for climate policy innovation and for climate mitiga-
tion. © 2016 The Authors. WIREs Climate Change published by Wiley Periodicals, Inc.
How to cite this article:
WIREs Clim Change 2017, 8:e438. doi: 10.1002/wcc.438
INTRODUCTION
For nearly two decades, the international commu-
nity has been struggling to nd a strategy to allo-
cate responsibility for reducing greenhouse gas
(GHG) emissions. Equity and justice concerns have
been of paramount signicance in international
negotiations on climate change ever since the adop-
tion of the 1992 United Nations Framework Conven-
tion on Climate Change (UNFCCC). Underwriting
the UNFCCC is the principle of common but differen-
tiated responsibility (CBDR), which acknowledges
that countries have contributed by varying scales to
the mounting problem of climate change, will be
exposed to different levels of impacts, and have differ-
ent capabilities (e.g., nancial and technological) to
mitigate emissions. Under the 1997 Kyoto Protocol,
developed countries agreed to take on legally binding
emissions reduction targets for 2012, recognizing
*Correspondence to: S.Aonis@leeds.ac.uk
Sustainability Research Institute, University of Leeds, Leeds, UK
Conict of interest: The authors have declared no conicts of inter-
est for this article.
Volume 8, January/February 2017 1of19
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published by Wiley Periodicals, Inc.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any
medium, provided the original work is properly cited.
their dominant role as historic polluters. However, as
emission targets by developed countries alone would
evidently be insufcient to address climate change, the
2011 Durban Platform recast equity and differentia-
tion in the climate regime by calling for a roadmap
toward an agreement that would include mitigation
commitments for all major emitters irrespective of
country classications.
1
The debate thus progressively
shifted from whether developing countries should
participate in mitigation efforts to what type of miti-
gation contributions they should actually undertake.
Absolute, intensity or deviation from business-as-
usual targets featured, among others, as potential
options during the deliberations of the 2014 Lima cli-
mate conference.
2
During the 2015 Paris climate con-
ference, this rewallbetween developed and
developing countries was largely removed, and the
Paris agreement historically calls for climate action to
be undertaken by all countries, albeit with common
but differentiated responsibilities.
3
When the international community discusses mit-
igation targets, it is exclusively referring to emissions
generated at the point of production, that is, emissions
physically produced mainly through the combustion of
fossil fuels (coal, natural gas, and oil) for energy and
transportation within the jurisdiction of a given state.
While production-based (PB) accounting is currently
the UNFCCCs adopted accounting principle, concerns
about its limitations in addressing emissions embodied
in international trade have led to increased calls for a
switch to, or an amalgamation with, other accounting
approaches.
4,5
Consumption-based (CB) accounting
has so far emerged as the most prominent alternative,
as evidenced by the wealth of scholarly attention it has
attracted since the turn of the century.
6,7
The CB
accounting approach accounts for emissions at the
point of consumption, meaning that it is the end con-
sumer, instead of the producer, of goods and services
who is allocated these associated emissions. The main
difference, therefore, between the PB and CB account-
ing approaches is that application of the latter would
entail a state with an abatement policy to cede responsi-
bility for emissions associated with its export produc-
tion and accept responsibility for the embodiedor
virtualemissions of its imported goods and services.
6
To address these attributed emissions, net importers
could strengthen emissions reductions within their terri-
tories, reduce the consumption levels of their residents,
or contribute to mitigation efforts in foreign countries.
Switching from a PB to a CB accounting system
would have important implications for global mitiga-
tion policies and consumption patterns, given that
2025% of overall carbon dioxide emissions are from
the production of internationally traded products.
811
In this respect, several studies have highlighted the
instrumental role of China in net emission transfers,
especially so given the high carbon intensity of its
energy system, which accounts for about 25% of its
net carbon-trade balance.
12
Fischer
13
further notes that
55% of the growth in global carbon dioxide emissions
during the 1990 to 2008 period were due to China,
with exports accounting for one-third of this contribu-
tion. The Chinese example is characteristic of regional
trends, whereby developed countries tend to be net
importers and developing countries net exporters of
emissions.
8,9,11,14
This is of course a tendency, and
there are notable outliersparticularly Russia and
former Soviet states in Eastern Europe.
8
Australia and
Canada are also listed in the literature as net exporters
of emissions,
8,11
even though their net emissions
exports are small and these countries may therefore
shift from one group to another. A more recent study
by Arto et al.,
15
for example, lists them both as net
emission importers. Country size (GDP, population,
and area), as well as reliance on resources (domestic or
imported) and manufacturing for exports are all factors
inuencing whether a country will ultimately emerge as
a net importer or exporter of emissions.
8,11,16
Existing research on CB accounting has focused
more on technical aspects by developing and stream-
lining methods for calculating emissions embodied in
trade, or using it to inform discussions on burden
sharing and to distribute a global carbon budget
amongst countries. A smaller but growing body of
literature has taken a more political perspective on
CB accounting, advocating or opposing its adoption
as the UNFCCCs accounting principle. While several
studies have argued that the adoption of a CB
accounting approach would carry benets for inter-
national climate change policy,
6
others have taken a
more skeptical stance, doubting its effectiveness and
political feasibility, as well as its overall applicability
in a real-world setting due to methodological
complexities.
1719
This study aims to review this
debate and outline the reasons why CB accounting
has gained stature in international discussions on cli-
mate mitigation on the one hand, but has struggled
to secure adequate political support on the other. We
show that due to a range of technological and policy-
related uncertainties, the CB accounting approach is
unlikely to replace its established PB counterpart, at
least in the foreseeable future. That said, the CB
accounting approach represents an invaluable tool
for the international community to better understand
the effect of consumption patterns on emissions and
take the response measures necessary to address
emissions embodied in trade.
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The Case for CB Accounting and The Case
against CB Accounting sections discuss the variation
in opinions in the literature by outlining the opportu-
nities that would arguably arise from adopting CB
accounting, as well as the problematic aspects that
could potentially emerge. The Spectrum of Imple-
mentation Possibilities and Implementation Policies
sections then present the spectrum of implementation
possibilities, ranging from the status quo to more
transformational options, and identify policy
mechanisms that can be utilized to directly or indi-
rectly address CB emissions. Some of these policies
are more controversial than others and it would be
overly optimistic to expect that such an approach
would resolve many of the challenges of climate gov-
ernance. It could, however, offer an important new
perspective and help to inform on-going international
climate change negotiations.
THE CASE FOR CB ACCOUNTING
The CB accounting literature has highlighted a num-
ber of benets that could accrue from attributing
responsibility for GHG emissions on the basis of con-
sumption instead of production, mostly on the
grounds of increased emissions coverage, encourage-
ment of cleaner production practices, political accept-
ability, and equity and justice. Taken together,
proponents of such an approach argue that its adop-
tion could enable the international community to
move closer toward achieving the ultimate objective
of the UNFCCC of avoiding dangerous anthropo-
genic climate change.
20
Emissions Coverage
One of the most prominent arguments in favor of CB
accounting is the opportunity for the global climate
change regime to cover more emissions. First, this is
mainly the outcome of bringing the export sectors of
developing countries, which are generally more
carbon-intensive compared to those of their devel-
oped country counterparts, into the scope of interna-
tional climate policy. From the perspective of the
Kyoto Protocol, this advantage was strongly high-
lighted, given that more emissions would be covered
without necessarily broadening participation beyond
developed countries. Following the adoption of the
Paris agreement, this argument is somewhat outdated,
as virtually all countries have issued pledges and all
emissions are now covered. That said, CB accounting
would still offer an opportunity to the international
community to better understand the impact of trade
on global emissions and thus address the challenge
whereby developed countries clean up domestic pro-
duction by merely shifting it elsewhere.
11
Second, the UNFCCCs PB accounting approach
does not cover GHG emissions arising from aviation
and bunker fuels. Currently, such emissions are not
allocated to individual countries, being only reported
as a memo item to their national GHG inventories.
10
This situation arose due to uncertainties about allocat-
ing responsibility. Harris and Symons
21
note that allo-
cating them on the basis of cargo/passenger destination
was considered prior to the adoption of the Kyoto Pro-
tocol, but lack of adequate data resulted in such propo-
sals being dismissed as impractical. Recent efforts by
the European Union (EU) to incorporate international
aviation emissions into its Emissions Trading Scheme
(ETS) have been met with resistance from, inter alia,
major developing countries, who questioned the pro-
posals consistency with the cornerstone UNFCCC
principle of CBDR. Adopting a CB accounting
approach could resolve this impasse, as consuming
countries would assume responsibility for emissions
associated with the international transport of goods.
Third, a further practical advantage stemming
from the application of the CB accounting approach
is arguably the opportunity for the climate change
regime to cover emissions embodied in trade and
thus deal with strong and weak carbon leakage.
Strong carbon leakage, also known as policy-
induced leakage, occurs when carbon-intensive
sectors of an economy decide to relocate their man-
ufacturing base from a developed country which
may have introduced carbon price legislation, like
for example an emissions trading scheme, to a
developing country that is currently subject to lim-
ited emissions controls.
22,23
Such off-shoringof
emissions may result in relative decarbonization in
wealthy nations, but such effects are nominal at best
as emissions reductions are more than counterba-
lanced by the importation of cheaper, yet often
more carbon-intensive, substitutes from what can be
less regulated locales of the global economy.
24
Aichele and Felbermayr
25,26
found strong evidence
for carbon leakage in various industries, such as
basic metals or paper and pulp. However, the
occurrence of strong leakage is contested
2729
and
more empirical data are required before safe conclu-
sions can be drawn. Currently, the literature sug-
gests that the drivers of traded carbon are too
diverse to be solely attributed to off-shoring due to
stringent environmental standards or cleaner pro-
duction patterns in developed countries.
11,17,30
Weak carbon leakage, however, is unrelated to
mitigation policy within developed countries, being
instead the result of two issues. First, the desire of
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companies in developed countries to reduce employ-
ment and regulatory compliance costs by relocating
to the global South.
7
Second, the import of goods
manufactured by native companies in foreign coun-
tries with higher competitive advantages and lower
costs. Peters
22
has provided strong evidence for the
latter cause and considers weak carbon leakage to be
driven by demand. He thus denes weak leakage as
the amount of emissions that are generated outside a
given country in order to meet its local consumption
requirements. Weak leakage constitutes an important
matter, as clearly reected by the signicant rise in
net emissions transfers. Various studies show that
GHG emissions embodied in imports of goods and
services intended to satisfy domestic consumption are
progressively overtaking those embedded in domestic
production, a trend likely to persist under current
international policies.
8,9,31
Davis and Caldeira
8
note
that 23% of global carbon dioxide emissions in 2004
were traded internationally, primarily as exports
from China and other emerging markets to consu-
mers in developed countries. Using the United King-
dom (UK) as a case study, Barrett et al.
10
note that
an equivalent volume of GHG emissions associated
with goods and services to satisfy UK consumption
were emitted outside the UK as those emitted inside
its borders. They further highlight that the increase in
UK emissions transfers is from countries not covered
in Annex B of the Kyoto Protocol, mainly in Asia.
Druckman et al.
32
reach similar conclusions, showing
that any achievements on the part of the UK in redu-
cing its PB emissions are negated when a consump-
tion perspective is adopted.
Such net emission transfers have been growing
at an average yearly rate of 17%, exceeding the reduc-
tions in production emissions that developed countries
as a whole have achieved in the same period.
9,13
In
other words, developed countries have increased their
CB emissions faster than reducing their PB emissions;
or, as Rothman
33
notes, consumers in wealthy nations
have simply passed the buck to people in other places
or in other times.Hence, while many developed
countries may have met their actual Kyoto Protocol
commitments, the associated increase in the emissions
of developing countries that are producing their
imported goods and services cancels out, and even
outstrips, their domestic mitigation inroads.
14
Adopt-
ing a CB accounting approach, therefore, would cover
more emissions and help tackle this phenomenon.
Encouragement of Cleaner Production
A shift toward CB accounting practically entails
bringing the export sector of developing countries
into the scope of international climate policy; a move
that CB accounting proponents argue has clear bene-
ts in terms of facilitating the diffusion of cleaner
production practices and technologies to these coun-
tries. As Barrett et al.
10
explain, energy production,
energy-intensive sectors and transportation are the
main sources of emissions coming under the spotlight
of PB accounting, whereas a CB accounting approach
would bring to the forefront the contribution of ser-
vices, plus that of manufactured products like electri-
cal appliances, food, and textiles. With the services
sector becoming an ever increasingly important com-
ponent of their economies, developed countries turn
into substantial procurers rather than producers of
manufactured goods.
34
Following an international
division of labor, developing countries have assumed
a more prominent position in the production and
international trade of manufactured goods. Yet, a
series of studies has highlighted that the carbon con-
tent of developing country exports is much greater
than that of their developed country counterparts.
8,9
Emission inventories based on consumption,
rather than production, imply the need for policy
instruments capable of tackling the emissions of such
key traded products. As a consequence of adopting
CB accounting, therefore, developing countries
would be encouraged to implement energy efciency
improvement strategies and reduce the carbon foot-
print of their export production in order to safeguard
their access to foreign markets. They could even, as
Peters and Hertwich
24
observe, use improved envi-
ronmental performance as a marketing tool against
competitors targeting similar export markets. How-
ever, as will be highlighted later on, this would
require support in the form of technology and/or
nance to give developing countries the capacity to
compete fairly in the world market.
To undertake successful domestic action by
engaging with CB accounting-related policies that
would entail developing countries reducing their
emissions or, at least, regulating them, would require
close cooperation with importing partners. As a
result, CB accounting could support the case for tar-
geted technology transfer initiatives between trading
partners.
20
For instance, the Kyoto Protocols Clean
Development Mechanism (CDM) concept is totally
compatible with a CB approach, given it was
designed from the outset with the intention of devel-
oped countries assuming more responsibility than
that dened by their territorial emissions.
11,31
The
prospects for streamlining the CDM have thus been
pinpointed, with Peters
5
positing that a CB account-
ing approach would allow project sponsors to enact
mitigation projects in areas that reduce consumption
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emissions in importing countries. Of course, because
a CDM action in a developing country would reduce
the CB emissions of several of its trading partners,
the resulting CDM reductions would need to be
counted toward meeting the mitigation targets of the
sponsoring countries alone.
In addition to enhancing green technology trans-
fers, the provision of incentives for investing in cleaner
and more efcient production systems in developing
countries has the advantage of presenting the interna-
tional community with further, more cost-effective
mitigation options, particularly given that in excess of
two-thirds of the lowest-cost abatement opportunities
currently lie in developing countries.
21
Developed
economies are relatively clean, thereby facing high
marginal costs for reducing emissions. Toughening
territorial emissions targets further, in the absence of
developing country participation and without the
enactment of CB measures, would not only be costly,
but could potentially also encourage leakage.
35
Political Benets
Prior to the 2015 Paris Agreement, the literature
highlighted the potential of the CB accounting
approach to encourage global participation in mitiga-
tion efforts and stimulate the crafting of a new multi-
lateral climate change agreement.
36
Mitigation
commitments under the Kyoto Protocol were nego-
tiated during the mid-1990s, with Parties being split
into two main groups: Annex I and non-Annex
I. The former had binding quantitative commitments
and reporting obligations, while the latter had quali-
tative obligations, more lenient reporting require-
ments and eligibility for nancial and technological
assistance.
37
The expectation had been though that
as emissions in major non-Annex I Parties grew they
would gradually take on obligations similar in nature
to those of their Annex I counterparts. However,
major emerging economies largely continued to
evoke the CBDR principle to avoid assuming respon-
sibilities on par with developed countries.
Detrimental to the success of the Kyoto Proto-
col was the refusal of the United States (US) in 2001
to ratify the Protocol on the basis that it excluded
high emitting developing nations and it would harm
the US economy. Canada, Japan, New Zealand, and
Russia have since withdrawn from the second com-
mitment of the Kyoto Protocol, citing similar con-
cerns. It had therefore been argued that switching to
CB accounting could have provided the incentives
necessary for these developed countries to re-engage
with the Kyoto process, as well as introduce emer-
ging economies into a global climate agreement. In
contrast to PB accounting and the Kyoto Protocols
notion of differentiated responsibility, adoption of
the CB accounting approach would alleviate to a
great extent the competitiveness concerns of several
developed countries that have so far refrained from
signing up to binding emissions targets in the absence
of some degree of equivalent commitments by major
developing country emitters. Indeed, as Girod et al.
38
note, domestic industries in developed countries
could be disproportionately disadvantaged in both
home and foreign markets by policies explicitly tar-
geting production-side variables, like for instance
unilateral environmental taxes. In an era of globally
integrated goods and capital markets, differentiated
responsibility equates to differentiated costs depend-
ing on an emitters geographical location. In addi-
tion, the environmental effectiveness of such
measures is also curtailed by the fact that in most
cases producers of energy-intensive goods, like for
example steel or cement, are exempted due to com-
petitiveness concerns.
38
The CB accounting approach addresses compet-
itiveness concerns because the cost of exported pro-
ducts is not affected, and also because both imported
and domestically produced products in a home mar-
ket are required to comply with the same environ-
mental legislation, that is, a carbon tax or a
mitigation commitment.
24,38
An international climate
change regime that is grounded in a properly crafted
CB accounting mechanism could therefore strengthen
the case for promulgating policy measures aimed at
reducing embodied emissions in developed world
consumption, hence helping create in the process a
broader coalition with a shared political vision
toward more global actions.
21
The above arguments continue to apply to a
great extent even after the adoption of the 2015
Paris Agreement. Parties submitted voluntary
(i.e., nonbinding) targets that even if implemented in
full will be grossly inadequate in keeping global
warming below 2C.
39
This approach of adopting
an insufcient and nonbinding agreement was appar-
ently the only one acceptable to all Parties.
40
The
agreement largely ends the dichotomy between devel-
oped and developing countries, but a degree of dif-
ferentiation is still present. While the agreement
notes the principle of differentiated responsibilities
and respective capabilities, it adds in the light of dif-
ferent national circumstances,thus allowing for a
more dynamic interpretation.
40
As is noted in the
agreement, industrialized countries are to undertake
absolute GHG reductions, while developing coun-
tries are to move to economy-wide targets over time.
Such differentiation could have short- or
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medium-term implications for competitiveness. That
said, the request on Parties to communicate or
updatethese pledges on a ve-yearly basis is an
important one in that it signals a shared understand-
ing among them that each successive review should
lead to further strengthening of target ambition. This
conclusion is further collaborated by the surprising
inclusion of the aspirational objective to cap temper-
ature rises at 1.5C above preindustrial levels. The
Paris agreement did reinvigorate the climate regime;
yet it will require serious political commitment to
deliver.
Equity and Justice
Starting with equity and justice, a number of studies
have argued that pressure on environmental ecosys-
tems is a direct consequence of afuence and unsus-
tainable consumption practices in developed or
afuent countries.
4143
Subsequently, as increased
consumer demand is ultimately driving production
patterns, some argue that responsibility for any emis-
sions caused in the process should fall on the nal
consumers themselves.
5,6,23
Others take a contrasting
stance, arguing that producers should also have a
share of responsibility because it is them that decided
in the rst place to engage in the production of goods
and services and to promote consumer demand for
these products in order to harvest the associated eco-
nomic and home-country employment benets.
44
Another argument relating to equity and justice
revolves around the issue of historical responsibility.
Raupach et al.
41
and Wei et al.
43
estimated that
developing economies have contributed only 23% of
global cumulative emissions and are responsible for
only about 2040% of the global average tempera-
ture rise since the preindustrial era. This estimate not
only stresses the ecological debt held by industria-
lized states, but also the rights of developing coun-
tries to improve the living standards of their
populations without carrying an excessive mitigation
burden. Based on this optic, Ferng
45
proposes that
those states that hold an ecological decit (i.e., debt)
should bear the obligation to assume a larger share
of the overall mitigation costs. Baer et al.
46
and
Kartha et al.,
47
in turn, have developed the Green-
house Development Rights Framework, according to
which states with an average income per capita
below a threshold of approximately $16 to $20 US
dollars per day should be exempt from bearing miti-
gation costs. This idea relates directly to the capabil-
ity or ability to payprinciple, according to which
developed countries should shoulder a greater quota
of mitigation cost burdens due to their greater levels
of wealth and capacity to act.
48
Developed countries,
in contrast to their developing country counterparts,
are therefore thought of as being better positioned to
implement emission reduction obligations without
disproportionately compromising welfare delivery.
23
As impacts from consumption are shifted from one
location to another, adopting a PB accounting
approach implies that developed countries do not in
reality face up to their historical responsibility for the
build-up of GHGs. If a production perspective is
taken, developed countries may give the impression
that they are succeeding in reducing their emissions,
which is not accurate if viewed from a CB perspec-
tive. However, a CB approach would free a larger
portion of the carbon budget to the developing
world. Following this line of thinking, Peters et al.
9
also argue that while the PB accounting approach
may currently benet economic growth in developing
countries, the latter will nd themselves worse off in
the future, as efforts at curtailing their increased
emissions will by then be more costly, especially for
those that will have assumed their own emission
reduction targets.
THE CASE AGAINST CB ACCOUNTING
While several studies have highlighted to policy-
makers the advantages of applying a CB accounting
approach, various others have adopted a more skepti-
cal stance, bringing to the fore a wide range of com-
plications that would interfere with or prevent
initiation of implementing policies. These could be
grouped into three main categories: effectiveness/
efciency concerns, practical impediments, and
political incompatibility.
Effectiveness and Efciency Concerns
Critics of the CB accounting approach have ques-
tioned it on grounds of effectiveness and efciency.
First, Liu
17
argues that both the CB and PB account-
ing approaches ultimately share the same goal,
namely to use policies, so as to urge producers to
reduce emissions. The former intends to achieve this
goal indirectly by impelling consumers to exert pres-
sure on producers, while the latter aims at producers
directly. He then goes on to argue that while current
environmental regulations and policies target produ-
cers, inserting consumers into the equation would
result in intricate policymaking procedures with
diminished practicality. Consequently, he concludes,
it would make better sense to induce producers to
invest in cleaner production practices and then sim-
ply pass extra costs to the consumers.
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A second criticism comes from Jakob et al.
18
who argue that advocates of CB accounting normally
do not take into account the general equilibrium
implications that determine the global patterns of
production and consumption. Jakob and
Maschinski
12
and Jakob et al.
49
refer to trade theory
to demonstrate how regulating climate change based
on consumption emissions does not guarantee a
greater reduction in global emissions compared to PB
accounting, and could even result in an increase in
global emissions. Pricing emissions embodied in
imported goods does not avoid the same quantity of
emissions. They show how the regulation of emis-
sions embodied in EU imports of Chinese goods
would result in an increase of carbon leakage by
shifting Chinese production from its export markets
to more carbon intensive nonexport sectors. Whilst
CB accounting promotes the reduction of net
imported emissions, what ultimately matters is the
difference in the carbon intensity of foreign export
markets compared to their domestic markets as trade
distortions are likely to shift foreign production from
export to domestic sectors, which are often more car-
bon intensive. In this sense, Jakob et al.
18
argue that
CB accounting does not necessarily provide a direct
link between a countrys actions and changes in emis-
sions. For instance, they provide a hypothetical sce-
nario whereby the EU could employ its dirtiest
technologies to produce exports without affecting its
emissions account.
18
Along similar lines, the same
authors mention that if less regulated countries, like
China and India, were to cease trade and meet all
their consumer demands domestically, emissions
would not signicantly change as higher carbon
intensive domestic production would be offset by
lower carbon intensive domestic production in regu-
lating countries. Essentially, it is not proven that the
accounting approach would increase the effectiveness
and efciency of climate mitigation.
Third, researchers highlight inter alia the need
to factor in rebound effects, where energy efciency
improvements will increase rather than reduce energy
consumption.
50
While this is obviously independent
of accounting approaches, the fact remains that a CB
one may well stimulate investments in emission
reductions and energy efciency. However, these will
not pave the way for a decoupling of economic
growth and environmental deterioration unless rapid
consumption growth is urgently addressed. As Liu
17
notes, a drop in emissions by 50% due to cleaner
technologies would be negated by a doubling of pro-
duction/consumption. As Isenhour and Feng (Ref 51,
p. 7) argue, a valid point to be made is whether
attempts by developed countries to address their
consumption emissions through promoting the trans-
fer of technologies into developing countries simply
rationalizes accelerated consumption and a globa-
lized rebound effect.Consequently, as Barrett
et al.
10
posit, it is imperative to consider rebound
effects, so as to obtain a realistic assessment of the
scale of possible emissions reduction.
Practical Impediments
CB accounting reallocates emissions from the produ-
cing industrial sectors to the nal consumers of pro-
ducts. Although the two accounting approaches
represent the two sides of the same coin, their differ-
ences have widespread implications when it comes to
compiling national emissions inventories. As already
noted, a PB system would measure emissions physi-
cally produced within the jurisdiction of a given
state, while a CB inventory would deduct emissions
embodied in its exports and factor in emissions
embodied in its imports. The PB accounting
approach was deemed favorable by UNFCCC par-
ties, given its simplicity relative to CB accounting,
consistency with current methodologies for compiling
energy statistics and suitability for differential
reporting processes among different states(Ref 18,
p. 13). It is important to note that all accounting
schemes suffer from a degree of uncertainty. When it
comes to PB accounting, for instance, poor statistical
infrastructures in many developing countries are a
constraining factor when it comes to producing accu-
rate emissions inventories.
52
In addition, different
global datasets generate different emissions inven-
tories.
53
For example, Guan et al.
54
found that Chi-
nese provincial carbon dioxide emissions calculated
from energy usage exceed the national reported emis-
sions account by 1.4 gigatonnes.
Yet, constructing CB national emissions inven-
tories is an inherently more challenging process, as
they are typically based on PB accounting while also
employing additional modeling assumptions, like sec-
toral carbon intensities in international trade. Conse-
quently, they suffer from both the statistical
uncertainties of PB accounting and those stemming
from their own assumptions(e.g., uncertainties
related to the assumptions embedded in the models
used to determine them) (Ref 44, p. 4). To be prop-
erly constructed, they would require practically all
traded goods to be registered with their carbon con-
tent.
55
Monitoring and measuring embedded carbon
is a more complex methodological process, with data
uncertainty (derived from data quality and availabil-
ity of main trading partners and more complex calcu-
lations than in PB accounting) and inadequate
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reporting being referenced as stumbling blocks that
could confound the entire process.
24
As production
emissions are used in the calculation of consumption
emissions, Peters et al.
56
found that the uncertainty
involved in the compilation of PB inventories is
greater than the uncertainty associated with the eco-
nomic and trade input data used in CB accounting.
As China is the worlds largest exporter of goods,
uncertainties around its production emissions
54
will
affect the CB accounting of its importers. Problems
can be further exacerbated by lack of capacity in the
great majority of developing countries to develop
such demanding CB inventories, especially at a time
when the UNFCCC Secretariat provides on-the-
ground assistance to developing countries in prepar-
ing their PB accounting-based national inventories.
21
An additional impediment for a state aspiring
to put in place an accurate and reliable CB inventory
relates to the need for compiling data from its numer-
ous trading partners. A multitude of traded products
have various components, many of which are pro-
duced in a constellation of different countries. The
greater the complexities of the international supply
chain in question, the greater the nebulousness when
it comes to data quality and availability.
24
Harris
and Symons
21
refer to the automobile industry as an
illustrative example. A PB accounting approach
would allocate emissions from the manufacturing of
the automobiles different components to the inven-
tories of the different countries along the production
chain. A CB accounting system, however, would allo-
cate emissions from all manufactured components
directly to the country importing and selling in its
domestic market the nal product, that is, the
automobile.
Finally, the preferred method for constructing
CB accounting inventories at national and supra-
national levels is multiregional inputoutput analysis
(MRIOA).
20,57
An MRIO model gathers domestic
and import inputoutput tables from a number of
individual nations or regions, combining them to
form a single aggregated matrix, reconciled by trade
statistics. This matrix represents the supply chain,
capturing the inter-industry relationships between all
the trading partners. Such a model is useful not only
for allocating emissions (or other environmental
extensions) to nal demand, but also for estimating
the changes in production (or emissions) in one
region derived from changes in nal demand regis-
tered in others.
58
One of the major drawbacks of
these models is that they require large amounts of
data harmonized according to sector classication,
base year prices and a unique currency. Data of this
nature are often not readily available, requiring the
modeler to introduce a number of assumptions to
replace any missing values.
20
As can be noticed, the
complicated calculation and formalization processes
involved, as well as the data-intensive and
assumption-prone nature of CB methodologies,
severely limit the prospects of CB accounting being
promulgated via an international agreement in the
near-to-medium term.
17,55
Political Incompatibility
Ideally, at least from an economic perspective, an
international climate change regime operating under
the CB accounting approach would be mostly effec-
tive if a global tax on GHG emissions were to be
introduced, as the price of the product would reect
the impact.
59
As noted earlier, for such a scheme to
function properly, you would rst need accurate
information on carbon embodied in every produced
good, so as to put in place an adequate taxation sys-
tem. Following that, you would need all the revenue
collected via these carbon taxes on the exports of
developing countries to be disbursed back to them so
that they can be subsequently invested in greening
their export production. Such a transformative
scheme, however, could only be put into place by
means of an international treaty, that is, via almost
universal cooperation. Consequently, critics argue,
such policy designs border the realm of impossibility,
at least in the short-to-medium term.
19
Even if we were to assume that a CB
accounting-based regime were to be actually consid-
ered by the international community, another obvi-
ous complication would arise from the fact that
under a CB accounting inventory system a country is
attributed with emissions that were emitted outside
its area of jurisdiction, that is, in a different country
or countries. Whether developed countries will accept
liability for emissions they have no control over is a
key question.
13
A similar argument also applies to
developing countries; would they be prepared to
allow developed countries to exert inuence over PB
activities taking place within their borders? Assuming
they do, the level of collaboration required to design
and put in place CB inventories would go way
beyond what the international community has been
accustomed to in current UNFCCC deliberations.
5
An issue that will surely emerge will concern the
manner in which the embodied emissions of develop-
ing country exports are monitored, reported, and
veried (MRV) by the international community to
provide transparency and ensure compliance of the
developed countries that have taken over responsibil-
ity for mitigating them.
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In the aftermath of the 2009 Copenhagen cli-
mate conference, developing countries rejected MRV
for policies that were unsupported internationally,
citing infringement of sovereignty as a justica-
tion.
60
However, under a CB accounting system
such a stance cannot be maintained. If the US gov-
ernment were to be assigned responsibility for part
of Chinas emissions, you can expect the former to
demand that the international community, via for
example the UNFCCC, has direct control over
Chinas MRV promulgating procedures. MRV is
vital for progress on emissions reduction and lack
of transparency could delay progress, or stop it alto-
gether. A danger, therefore, with adopting a CB
accounting approach is that resolving MRV-related
complications could result in prolonged and time-
consuming international negotiations.
THE SPECTRUM OF
IMPLEMENTATION POSSIBILITIES
The preceding sections have outlined the arguments
for, and against, the adoption of CB accounting.
Given this debate, the question is raised as to the
potential options facing the international community.
In other words, can CB accounting play a role and if
yes, how? There are three main options according to
the literature that merit further investigation, from
one end of the spectrum to the other. The rst and
second are rather transformative in nature and entail
the international community formally adopting CB
accounting and engaging in remedial action aimed at
tackling the limitations outlined above. The third one
is simply continuing with the status quo, in which
CB accounting is merely used on a voluntary basis.
The rst option is full replacement, that is, the
complete substitution of PB accounting for CB
accounting as the accepted ofcial foundation for
accounting emissions. This option represents one
extreme of the spectrum and implies that net-
importing countries assume full responsibility for the
emissions embodied in their imports, elevating their
mitigation burden and making their legally binding
targets signicantly more stringent. The literature,
however, has scarcely explored this option, with only
a handful of studies having examined its potential
implications. Steckel et al.,
59
for instance, argue that
the initial allocation of emission allowances among
countries (e.g., per capita basis, historical responsibil-
ity, etc.) would represent a contentious issue. Differ-
ent allocation rules could favor either net-importing
or net-exporting countries, engendering welfare dis-
tribution effects. However, the authors also show
mathematically that if a global cap-and-trade regime
with full emissions coverage was in place, both emis-
sion accounting principles would ultimately be equiv-
alent in terms of efciency of production and welfare
distribution. The authors allege that in both
approaches mitigation costs would be generally
borne by consumers, either directly or indirectly.
Peters and Hertwich (Ref 24, p. 58) have proposed
the application of a harmonized global tax based on
the carbon content of fossil fuels independent of the
country.Ghosh and Agarwal,
61
however, assert that
under CB accounting marginal abatement costs
(MACs) would be higher than under PB accounting,
mainly due to limited substitution possibilities
between energy and nonenergy goods in nal con-
sumption. In a similar vein, Jakob et al.
18
cast doubt
on the effectiveness of this option, declaring that, in
principle, CB accounting would not lead to a socially
optimal outcome. According to them, the Pigouvian
rule of introducing a price that is equal to the social
costs of an externality cannot be applied to emissions
embodied in imports. As has been mentioned, this is
due to the fact that avoiding one unit of imported
emissions (e.g., via a carbon tax or another instru-
ment) may not be equivalent to preventing the release
of one unit of emissions to the atmosphere. Further-
more, the authors warn that its actual implementa-
tion could be plagued with serious practical
problems, such as obtaining up-to-date information
on the carbon content of individual products and
high operating costs.
The second option is to go for a middle ground
approach and design a shared responsibilityregime
which splits the mitigation cost burden between pro-
ducers and consumers at various degrees, depending
on the extent to which different entities are willing to
cooperate in abatement actions. Unlike the full
replacement option, relatively more attention has
been devoted in the literature to examining such lim-
ited-or shared-responsibilityschemes, with mani-
fold frameworks having been advocated whereby
responsibility is shared between producers and con-
sumers, mostly from a theoretical perspective.
62,63
Such studies can be broadly classied according to
two research strands. The rst one analyzes how
responsibility can be allocated in general terms or
concentrate on a single country and its economic sec-
tors. In this area, Gallego and Lenzen
64
and Lenzen
et al.
65
conceptualize a more formal sharedframe-
work, whereby responsibility is apportioned depend-
ing on the benets obtained by each actor along the
supply chain, from the producer through to the con-
sumer. Andrew and Forgie
44
later applied this tech-
nique to examine the case of New Zealand. Their
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results show that producers would be responsible for
44% of domestic emissions, while the rest would be
taken by national and foreign consumers. Cadarso
et al.
66
did something similar for Spain, by suggesting
shared responsibility depending on the value added
at each step of the product chain. By applying their
method, they found that Spains share of responsibil-
ity as a producer country would be 34.4% higher
than its PB emissions in 2005, but would be around
6% lower than its overall CB accounting emissions.
The second research strand involves examining
how to apportion responsibility between different
countries by taking into account international trade
ows. Ferng,
45
for instance, suggests that responsibil-
ity should be allocated to both net-producing and
net-consuming nations, because both obtain benets
from their respective activities. Their specic shares,
however, would be subject to international negotia-
tions, considering the differences in economic struc-
tures, as well as income and consumption levels in
each of the participant states. Bastianoni et al.
67
sug-
gest a particular method, which they call the carbon
emission addedapproach, which follows a similar
logic to the concept of value added. Countries, in this
sense, assume co-responsibility for the emissions that
are addedat each stage of the global supply chain.
Marques et al.,
68
in a similar line of reasoning, pro-
pose a downstream technique, as opposed to the CB
accounting upstream approach, whereby nations
become responsible for those emissions that are nec-
essary to generate their income (i.e., payments to the
factors of production: wages, prots and rents) via
international trade. Following a different rationale,
Chang
69
designed a shared framework from the per-
spective of border tax adjustments, in which the car-
bon tariff rates serve as weights to apportion
emissions between participating economies. Kander
et al.,
70
in turn, have proposed a technology-adjusted
CB accounting approach whereby countries are cred-
ited for having greener exports than the world aver-
age, meaning their consumption account is reduced.
Those countries exporting more carbon-intensive
goods than the average on the global market are allo-
cated a higher consumption account. Otherwise
countries are not credited for cleaning up their
exports and some types of carbon-benecial trade are
discouraged.
Implementing shared-responsibility schemes,
however, would face some of the difculties dis-
cussed earlier. In political terms, as has been noted
by Ferng,
45
complex international negotiations
would be required to establish the share of emissions
that different states would be responsible for. Moreo-
ver, rules to ensure transparency and compliance
would need to be agreed at an international scale,
including any MRV issues usually raised by develop-
ing nations. In relation to practicality matters, the
reporting of CB emissions would be subject to the
technical complexity of constructing credible and
robust CB emission inventories. Regarding effective-
ness concerns, it is ambiguous if such a scheme
would contribute to delivering deeper emissions cuts
more rapidly compared to the status quo.
The third option, at the opposite end of the
spectrum, is represented by the continuation of the
status quo. In simple terms, this means preserving PB
accounting as the formal emissions accounting
approach while adopting CB accounting on a volun-
tary basis. A number of actors have demonstrated
interest in such approach, like for instance the Orga-
nisation for Economic Co-operation and Develop-
ment (OECD), which has undertaken a rst effort to
make public the CB emissions of its member coun-
tries and other developing nations.
71
The UK govern-
ment serves as another pertinent example, as it
makes public the countrys CB emissions inventory.
72
Following this action, the UK parliamentary commit-
tee on energy and climate change was motivated to
undertake an inquiry into CB accounting to examine
its practical feasibility and potential repercussions for
national carbon budgets.
73
In its conclusions, it urged
the government to explore the potential for integrat-
ing CB accounting into national policy making pro-
cesses, alongside PB accounting, so as to obtain a
more complete understanding of the countrys impact
on the global climate and encourage the development
of new policy options. This stance is signicant, as
this might inuence other states to follow similar
courses of action. Moreover, it might constitute a
stepping-stone toward more ambitious levels of
implementation in the future.
As has been said, CB accounting is currently
used for voluntary reporting. Various analysts have
posited that CB accounting has a great potential as a
diagnostic tool that could enable national govern-
ments to acquire a better understanding of the impact
of their consumption choices, and thus design poli-
cies and tools that can go some way toward mitigat-
ing the associated but currently unregulated
emissions.
18,52
However, this could be strengthened
by making reporting mandatory, thus enabling CB
accounting to better inform mitigation actions that
escape regulation and helping governments to avoid,
whenever possible, any course of action that may
lead to an additional rise in emissions outside their
natural area of inuence. Mandatory reporting in
other words would enable the international commu-
nity to harness the complete potential of this tool.
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Such an approach not only has benets at the
international level, but also at a subnational level, for
example for businesses and cities.
74
Whilst compa-
nies currently are not mandated to calculate their off-
site supply chain emissions, monitoring them would
provide them with a better understanding of the
potential risk of resource and carbon price uctua-
tions on their business/service provision activities,
both related to their upstream purchasing and loss in
sales.
75
CB accounting could therefore raise aware-
ness allowing organizations to realize efciency
improvements along their global value chains and to
manage aspects of risk.
To conclude, a complete redesign of the inter-
national climate change regime in favor of CB
accounting seems unlikely at this stage. Signicant
methodological, political and other uncertainties
remain with respect to the potential benets of
adopting shared responsibility schemes or moving
toward a full CB accounting regime. Yet, a limited
number of international actors are currently explor-
ing the potential of voluntary reporting of their con-
sumption emissions in order to better understand the
impact of their consumption choices on the global
environment. While this trend should be of course
encouraged, promulgating mandatory reporting
would be a decisive step that would allow the inter-
national community to design effective policies and
tools to mitigate emissions embodied in trade.
As the above analysis has highlighted, the cur-
rent PB accounting approach is undoubtedly here to
stay. Yet, traded emissions still merit the need to be
addressed, as they undermine mitigation targets in
regulated countries. The following section outlines a
number of readily available policy options that could
prove to be useful in dealing with CB emissions
under the current PB accounting approach.
IMPLEMENTATION POLICIES
Following the 2015 Paris agreement, the global con-
sensus on climate change action has been revitalized.
However, reducing emissions in line with a 2 degree,
or lower (i.e., 1.5 degree), future is likely to require a
reduction in absolute demand, at least while we wait
for global scale decarbonization and negative emis-
sions technologies to be deployed.
76,77
Consumption
accounting identies: (1) emissions intensive trade
ows to ensure impacts from consumption are not
shifted from one location to another and (2) high
impact consumption activities where policy can inter-
vene to reduce aggregate emissions. Domestic policies
can therefore intervene to mitigate traded emissions
directly via trade mechanisms, or indirectly by redu-
cing emissions in countries outside ones territory, as
well as implementing domestic actions focused on
consumption.
What follows are examples of such policies
some more controversial than othersthat could
address consumption emissions under a status quo
approach. These are not a denitive list of policy
options, and not specic to CB accounting, but we
have analyzed policies that are outside the main-
stream, of which the current focus is overwhelmingly
on the deployment of domestic cleaner production
technologies. Even within the CB literature there is a
bias toward border carbon adjustments, with much
less attention toward policies focused on consump-
tion patterns.
Trade Mechanisms to Address Emissions
Embodied in Trade
When resorting to unilateral measures, applying bor-
der trade adjustments for both imports and exports
has been suggested as an alternative.
7881
In general,
these include three types of measures: border taxes
(import tariffs or rebates on exports), mandatory
emissions allowance purchases by importers; and
embedded carbon product standards.
82
Such border
carbon adjustments would essentially tax imports
according to the emissions associated with their pro-
duction, thereby ensuring a level playing eld with
domestic competitors who are subjected to rmer
environmental policy and enforcement rules.
83
In
addition to import charges, border rebates for
exports would serve the same purpose for producers
competing in foreign markets. In other words, the
argument in favor of border carbon adjustments is
that countries should not enjoy a competitive advan-
tage because of their weaker climate polices.
84
Trade
restrictions could thus be used in order to deter or
punish free riding, via prohibiting or imposing higher
taxes on the exports of countries whose nonpartici-
pation compromises the environmental effectiveness
of the climate change regime. As Barrett
85
notes,
some of the most effective international environmen-
tal agreements to date, like the Montreal Protocol,
actually incorporate various forms of trade
restrictions.
Such an approach has been strongly advocated
by some analysts and even policymakers, with former
French President Nicolas Sarkozy tabling it in 2006,
causing a heated discussion at the time in Europe and
elsewhere.
86,87
Yet, a number of concerns have sur-
faced in the literature regarding its applicability in a
real-world context, relating inter alia to the potential
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for increased carbon leakage, negative welfare
impacts and incompatibilities with established trade
norms.
Border Trade Adjustments and Carbon
Leakage
Jakob et al.
18
state that border carbon adjustments
are not optimal policy tools to address emissions
embodied in trade. They note that price changes will
induce a change in the structure of production and
consumption as alternative product sources are
sought, which can both increase or reduce carbon
leakage. As they explain, the avoidance of importing
one unit of emissions does not necessarily translate
to avoiding one unit of emissions into the atmos-
phere; it just changes where the emissions are
emitted, which is largely dependent on the carbon
intensity of production. To be effective, such tools
will need to be complemented by measures reducing
the absolute volume of GHGs generated. Despite evi-
dence showing that industrialized countries have
managed to stabilize their production emissions par-
tially due to growing imports from developing coun-
tries, the use of materials, which embody emissions,
is almost absent from climate policies.
Another argument relating to leakage is that
carbon adjustments at the border could impact on
the comparative advantage of developing country
exports, especially those with a high price elasticity
of demand, thus detrimentally affecting the countrys
in question balance of payments.
49,88,89
China, for
example, the worlds largest exporter of emissions,
could suffer substantial losses, estimated to be as
much as 4% of its GDP.
90
However, should that
occur, tackling the resulting decits could necessitate
the scaling back of imports and their substitution
with domestically produced, potentially more
carbon-intensive alternatives.
17
Hence, reduced
export revenues could result in what Jakob and
Marschinski (Ref 12, p. 22) refer to as consumption
leakage.
Border Trade Adjustments and Welfare
Implications
Loss of developing country export revenues as a con-
sequence of border trade adjustments would fare neg-
atively in terms of social justice and equity due to the
potential negative welfare effects on exporting devel-
oping countries as a result of consumption leakage.
6
Such measures could even risk being negatively asso-
ciated with green protectionismor eco-imperial-
ism.
55
To overcome these CB accounting-related
complications and maintain stable levels of trade
growth, developing countries would need to reduce
the embodied emissions of their traded products on
the one hand, while maintaining and even enhancing
their comparative advantage on the other. To satisfy
such prerequisites, developed countries would have
to provide their developing country counterparts
with access to nance and clean technologies that
would enable them to achieve substantial reductions
in emissions in a cost-effective fashion.
19,79
It would
also involve the revenues from border adjustment
measures being earmarked for developing countries
as a means of compensation for the foregoing of
export revenues.
6
Such carbon levies would typically
be directly collected by the exporting country itself in
the form of export duties, or recycled back to them
in the case they are collected by the importing coun-
try in the form of border tariffs.
19
While this could
largely alleviate competitiveness concerns and
address equity discrepancies, explaining to EU or US
public opinion why they need to directly nance
infrastructure or capacity projects in China or India
might prove problematic.
21
Border Trade Adjustments and the Trade
Regime
Another problem that would require tackling with in
the eventuality of border trade adjustments on car-
bon embedded in imported goods relates to their
compatibility with World Trade Organization
(WTO) provisions. A core principle of free trade is
that of nondiscrimination between foreign and
domestic likeproducts. Countries are not allowed
to restrict imports of likeproducts on grounds of
environmental impact, such as for example their
greater embodied emissions. Exemptions exist, with
the protection of global resources being stipulated as
such in Article XX of the General Agreement in Tar-
iffs and Trade (GATT). Given their impact on com-
petitiveness and trade patterns, the survival of border
adjustments in WTO disputes could therefore hinge
on whether or not such measures are designed in
such a manner as to pass the environmental effective-
ness test. A number of legal conditions need to be
met and as Droege
55
notes, there is no guarantee that
anti-leakage measures will benet from Article XX
provisions.
The literature does tackle the question of
whether it is theoretically possible to put in place
WTO-compatible border adjustments. Helm et al.,
82
for instance, provide a list of features that could
enhance the prospects of a well-designed border
adjustment complying with international trade regu-
lations. Elements in their list include inter alia the set-
ting up of a system in which foreign and domestic
producers alike are subject to the same requirements
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(e.g., are both part of an EU-like ETS) or the institu-
tion of an arrangement under which trading partners
are (partially) exempt if they undertake domestic
efforts that are comparable in effectivenessto the
border adjustment (p. 389). Carbon equalization
measures, like the principle of best available technol-
ogyhave also been proposed.
91
However, Sakai and
Barrett
92
argue that these measures could signi-
cantly undermine the effectiveness of border adjust-
ments by reducing the tariffs faced by exporting
countries. Given there has been no precedent of a
carbon adjustment being challenged in the WTO, we
cannot move beyond the connes of a theoretical dis-
cussion.
55
Consequently, Lininger
19
concludes that
the only way a CB system could be securely put in
place and pass the WTO test is not via unilateralism
but through an international agreement.
Nontrade Measures to Address Emissions
Embodied in Trade
As alluded to already, alternative and potentially
complementary means of mitigating leakage men-
tioned in the literature include the extension of EU
ETS-type schemes, as well as augmenting worldwide
technology transfer cooperation.
10
Springmann
4
con-
cluded that an equivalent emission reduction to bor-
der tax adjustments could be achieved by linking
emissions trading schemes, whereby emissions are
capped and carbon allowances within this bought
and sold between sectors, across Annex I countries.
Such an approach would yield greater welfare bene-
ts for non-Annex I countries and would have more
political traction than implementing carbon tariffs on
energy-intensive goods imported from non-Annex I
countries. Carbon pricing is an efcient policy instru-
ment under any accounting scheme. In the form of
an ETS though, it is only in effect in some countries
or regions. The EU is such an example, but a low
carbon price in the EU ETS, explained largely by eco-
nomic activity,
93
has deemed it somewhat environ-
mentally ineffective. Price stability would need to be
improved to avoid price uctuations and instability,
while sector coverage would also need to be extended
to capture more emissions. In the longer term, the
EU ETS could link to emissions trading schemes in
non-Annex I countries.
4
China, for example, is cur-
rently preparing for the launch of its nationwide
emissions trading scheme in 2016, while South Korea
has already done so since January 2015.
94,95
How-
ever, these could also fail to achieve emissions reduc-
tion expectations if price changes distort trade
patterns, as identied by Jakob and Mashinski,
12
and
referred to under effectiveness concerns. Moreover,
it is important to recognize that linking emissions
trading schemes would lead to a larger, but still not
global, carbon market. Consequently, dealing with
imported emissions and addressing competitive con-
cerns would remain as important matters.
A second policy option could be to better utilize
domestic performance standards by including embo-
died impacts. Standards have already been successful
in reducing emissions in the operation of vehicles,
buildings, and appliances.
96
Materials are carriers of
industrial energy and a reduction or substitution of
material throughput could reduce domestic and inter-
nationally traded emissions. By ensuring that only
those products within a specied resource perfor-
mance bracket are sold on the market, regulated stan-
dards could ensure a certain level of resource
efciency. This is already implemented for energy
through, for example, European policies, including
the EU Ecolabel and Eco-design directives, without
imposing a tax on imported goods. Performance stan-
dards can play a key role, particularly when consu-
mers have limited knowledge or inuence over
product choice, like for example when renting a
house, in which case tenants have limited inuence
over the products in it. Taking the example of build-
ings, a lot of research shows that emissions embodied
in building fabrics are becoming an increasing pro-
portion of building-related emissions. Whilst existing
standards relate to operational energy efciency
addressing mainly production emissions (e.g., gas
combusted to heat a home), methods for carbon foot-
printing have been developed into standards to enable
calculation of the embodied emissions of products
which are not restricted to domestic operational
emissions.
9799
These, however, will need to consider
the relationship between embodied and direct energy;
for example, when is it optimal to replace an older
inefcient car with a new one that requires energy to
manufacture.
100
Material substitution and optimiza-
tion are potential avenues through which to reduce
embodied emissions.
101105
Similarly, standards could
be useful when it comes to nonenergy related pro-
ducts, such as nancial services, which produce few
direct emissions and are therefore largely neglected in
climate policy, yet have a high embodied content.
34
A
note of caution is due here though, as such emissions
effectiveness of efciency measures can be diminished
by rebound effects.
106
As Sorrell
106
points out, these
are extremely difcult to calculate, but the best availa-
ble evidence suggests that they are higher than previ-
ously thought and can offset or eliminate savings
from energy efciency by more than 50%.
107
Moving on, a third mitigation policy option
could relate to changing consumption patterns, given
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WIREs Climate Change Consumption-based carbon accounting
that consumption is the main driver of global emis-
sions. Girod et al.
38
suggest that reduced consump-
tion addresses carbon leakage as it reduces embodied
emissions. Moreover, as it affects domestic and
imported products equally, it has a lower effect on
international competitiveness. There is a growing
body of literature to show that reduced consumption,
through mechanisms such as working less, does not
necessarily mean reduced quality of life.
108
Girod
et al.
38
show the potential of consumer changes in
food, shelter, mobility, goods, and services to make a
signicant contribution to the international 2 degree
target. Consumption considers not only energy
demand, but demand for material goods and services
which can have a high embodied impact. For exam-
ple, Barrett and Scott
109
show the potential for
resource efciency measures to contribute to reducing
consumption emissions. Strategies include material
substitution,
110
product longevity
111
and product-
service systems.
112
Extending the scope of climate
policy to other areas such as resource efciency
increases the coverage of emissions beyond those
from a countrys production.
Fourth, carbon footprints could play an impor-
tant role, as they have been used to label products
and develop carbon calculators in the hope that they
will incentivise consumers to purchase and adopt
greener products and lifestyles.
113,114
They have also
been suggested to create positive competition
between companies to strive for a better carbon label,
including companies outside the consuming coun-
try.
115
In terms of effectiveness, however, the evi-
dence for information as a standalone mechanism to
reduce emissions is inconclusive,
115
with some sug-
gesting it has limited impact
51
unless used in combi-
nation with other measures such as obligatory
standards.
96
For example, carbon labels are needing
to compete with the billions spent on advertising,
stimulating demand for consumer goods.
116,117
Prac-
tically, it is argued in the literature that the standardi-
zation of product footprinting would need to be
improved to move from the voluntary reporting of
embodied emissions to enable the regulation of
embodied performance standards.
118
Politically, stan-
dards would also need to comply with trade regula-
tions that prohibit discrimination against the import
of similar products, which could be a contentious
issue if only some countries were subject to greener
standards.
115
Fifth, public procurement can also play a role,
given public spending on goods, services, and works
accounts for around 17% of GDP in OECD coun-
tries.
119
By exercising buying standards and specify-
ing green criteria systematically in public tenders,
governments can provide a stimulus for eco-
innovation along product supply chains.
119123
This
requires organizational resources, and hence political
support, clear guidelines and training, standardized
accounting methods, and increased cooperation with
suppliers.
Finally, voluntary agreements can at least be a
starting point to engage with international suppliers.
For example, Sweden set up a Centre for Environ-
mental Technology (CENTEC) at their Embassy in
Beijing, promoting and facilitating exchange of
envirotechin public and private sectors.
51
By pro-
viding cooperative technology assistance, Sweden is
able to inuence the carbon intensity of its imports
and indirectly introduce consideration of embodied
emissions into bilateral policymaking without placing
a domestic restriction on imports which could dam-
age demand for developing country products. The
host country is able to benet from the efciency
improvement, which should also improve economic
growth.
124
CONCLUSION
CB emissions have received considerable attention in
the literature in recent years, stimulated largely by
the perceived deciencies of the currently applied PB
accounting methodology. This paper presented the
case in favor of adopting the CB accounting
approach, as well as the arguments against. The
overall purpose was to tackle the question whether
CB accounting has a future or not. The short answer
is that the established PB accounting model is
unlikely to yield its place any time soon to its more
controversial CB accounting alternative. Thus, CB
accounting will not be relevant to the larger (interna-
tional) scale and, in this sense, it wont have a future.
That said, it could provide the international commu-
nity with an invaluable tool for understanding emis-
sion patterns in detail and informing the design of
the requisite policies to address these emissions that
are embodied in trade.
Acknowledging the predominance of the PB
accounting model, this article concluded by outlining
some options, relying on readily available policy
instruments, such as emissions trading, that could
directly or indirectly address the impacts of interna-
tionally traded emissions in a more practical and
politically acceptable fashion. The climate change
regime has gradually evolved into a prime example
of an ossifying process that continuously receives
new technical or scientic input but consistently fails
to act on it.
125,126
Arguing in favor of substituting
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PB accounting with CB accounting would most prob-
ably meet a similar fate. A step-by-step approach to
dealing with CB emissions could constitute a more
politically amenable narrative that could be more
easily embedded into the design of the future climate
architecture.
To conclude, in undertaking this exercise, a
number of gaps in the literature were identied that
merit further scrutiny. First, the literature on
shared-responsibilityoptions is still in its infancy.
While Lenzen et al.
65
and Andrew and Forgie
44
have offered some examples of shared-responsibility
schemes, more work is required to examine the
potential implications of moving toward a
middle-ground, especially from a global perspective.
Whilst the purpose of mandatory monitoring of CB
emissionsisclearto prevent the offshoring of
emissions to countries without emissions targets, so
as not to undermine global mitigation effortsthe
institutional framework to enable countries to func-
tion in such a system needs developing. Second, a
similar problem is encountered when it comes to
the literature on full CB schemes. Here, the existing
studies are equally scarce. Although the authors
that have conducted them generally seem skeptical
about the effectiveness of a full CB accounting sys-
tem, further research is needed to shed light on the
debate.
ACKNOWLEDGMENTS
We would like to thank the reviewers for their helpful comments. This work was supported by the ESRC Cen-
tre for Climate Change Economics and Policy (ES/K006576/1). It was also supported by the Research Councils
UK (RCUK) Energy Programmes funding for the Centre for Industrial Energy, Materials and Products
(CIE-MAP), grant reference EP/N022645/1, and the UK Energy Research Centre (UKERC), under award
EP/L024756/1.
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WIREs Climate Change Consumption-based carbon accounting
... Despite the benefits of the ETS, a crucial consideration in its application to construction supply chain is the impact of different Carbon Responsibility Allocation (CRA) principles. Various principles have been developed to assign carbon accountability to entities, such as nations or industrial sectors [20]. Producer Responsibility (PR), for instance, assigns the responsibility to the entities from which emissions originate [21]. ...
... To address such issue, Consumer Responsibility (CR) and Shared Responsibility (SR) have been adopted [21,24]. CR shifts the onus to consumers, whereas SR assigns joint accountability for carbon emissions to both producers and consumers [20,21,25]. These CRA principles are particularly important as they directly influence the allocation of carbon permits, thereby affecting overall carbon reduction efforts [26]. ...
... The implicit normative choices made in these analysis have limitations (Kartha et al. 2018a). Moreover, there are many ethical parameters that could be introduced to enrich the existing quantitative frameworks, such as progressivity , consumption-based accounting (Afionis et al. 2017), prioritarianism , and a right to development (Moellendorf 2020). Introducing these ethical frames into conventional quantification approaches generally implies greater allocations for poorer and lower-emitting populations, suggesting that the approaches that are typically highlighted in emissions allocation analyses tends to favour wealthier and higher-emitting countries. ...
... All these products have varying degrees of FCC. There are numerous studies on fossil inputs for energy 11,[14][15][16] and non-energy purposes [17][18][19][20] quantifying environmental pressures of production and consumption 21,22 in terms of carbon emissions [23][24][25][26][27][28] and waste streams. [29][30][31][32] However, very little is known about the necessary carbon streams used to maintain and expand the global technosphere. ...
... A recent debate has arisen about consumption-based accounting (CBA) versus productionbased accounting (PBA) for carbon emissions (Fan et al. 2016;Fernández-Amador et al. 2017;Afionis et al. 2017). CBA refers to the measurement of GHG emissions resulting from the consumption of all goods and services in a specified region, regardless of their origin (Wiedmann et al. 2016). ...
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Accurate estimation of greenhouse gas (GHG) is essential to meet carbon neutrality targets, particularly through the calculation of direct CO2 emissions from electricity generation. This work reviews and compares emission factor-based methods for accounting direct carbon emissions from electricity generation. The emission factor approach is commonly worldwide used. Empirical comparisons are based on emission factors computed using data from the Italian electricity market. The analyses reveal significant differences in the CO2 estimates according to different methods. This, in turn, highlights the need to select an appropriate method for reliable emissions, which could support effective regulatory compliance and informed policy-making. As concerns, in particular, the market zones of the Italian electricity market, the results underscore the importance of tailoring emission factors to accurately capture regional fuel variations.
... Studies at the national level have concluded that developed countries have higher carbon emissions measured by consumption, while developing countries have higher carbon emissions measured by production, and there is a large carbon imbalance implied by trade between developing countries and developed ones [22]. In developed countries, the increase of carbon emissions on the consumption side is much higher than the reduction of carbon emissions on the production side, and the problem of carbon leakage cannot be ignored [23]. ...
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The "carbon peaking and carbon neutrality goals" has put forward new requirements for China’s agricultural carbon emission reduction. It is easy to ignore the carbon emission transfer caused by agricultural trade if the reduction responsibility of carbon emission is merely defined from the supply side. Therefore, it is necessary to conduct in-depth research on agricultural carbon transfer for reasonably dividing the responsibility of agricultural carbon reduction in different provinces. In this study, the cross-section data of 31 provincial-level administrative regions in China in 2015, 2018 and 2021 were used to calculate the agricultural carbon emissions of each province from the production side, and the agricultural carbon transfer model was applied to study the spatial transfer characteristics of agricultural carbon emissions. The results show that: (1) In 2015, 2018, and 2021, the net carbon transfer in Chinese agriculture was 125.76 million tons, 132.49 million tons, and 133.02 million tons, respectively, accounting for 11.97%, 13.31%, and 13.61% of agricultural carbon emissions respectively. (2) The net input area of agricultural carbon emissions formed a spatial distribution pattern of four major regions which are concentrated in the southeast coastal areas, and the gap of net input of emissions was narrowing among the regions. Shanghai, Zhejiang, and Fujian are the regions with the largest net agricultural carbon input among the net input regions. The net agricultural carbon input increased from 43.00 million tons in 2015 to 52.71 million tons in 2021. In Guangdong and Guangxi, agricultural carbon emissions decreased from 41.34 million tons in 2015 to 35.61 million tons in 2021. In Sichuan, Chongqing, and Guizhou, agricultural carbon emissions decreased from 22.98 million tons in 2015 to 14.20 million tons in 2021. Beijing and Tianjin are the regions with the smallest net agricultural carbon input among the four net input regions, with the net agricultural carbon input increasing from 12.53 million tons in 2015 to 13.92 million tons in 2021. (3) The net output area of agricultural carbon emissions also formed a spatial distribution pattern of four major regions, and they were concentrated in the north of China with the center of gravity of net output shifting to the north. In 2015, Heilongjiang and Jilin were the regions with the largest net carbon output among the four net output regions. The net agricultural carbon output increased from 38.45 million tons in 2015 to 39.44 million tons in 2021. In Xinjiang and Gansu, the net agricultural carbon output increased from 15.87 million tons in 2015 to 23.37 million tons in 2021. In Inner Mongolia, the net agricultural carbon output increased from 17.03 million tons in 2015 to 23.05 million tons in 2021. Henan and Anhui have consistently maintained a high level of net agricultural carbon output, the net agricultural carbon output decreased from 35.54 million tons in 2015 to 25.68 million tons in 2021. On the whole, the spatial transfer of agricultural carbon emissions in China shows the characteristics of "north carbon transport to south" bounded by the Yangtze River. This paper believes that agricultural policies of carbon emission reduction should be formulated at both ends of agricultural supply and demand due to the spatial transfer of agricultural carbon emissions, which is not only conducive to stabilizing the production enthusiasm of major agricultural production provinces, but also conducive to controlling carbon emissions in output and input regions. For this purpose, the study puts forward countermeasures and suggestions to promote the reduction of agricultural carbon emission in different provinces, so as to better leverage the green and low-carbon development in the agricultural field under the guidance of the "carbon peaking and carbon neutrality goals".
... Explained variable (res_CO 2 ): To attribute all emissions that occur during production and distribution to the final consumers of goods and services [56], the explained variable is residents' carbon emissions. According to China's national economic classification, residents' consumption includes eight categories, such as food, clothing, residential, and so on. ...
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The responsible low-carbon behavior of household residents is a crucial factor for the purpose of achieving carbon neutrality in the economy and society. Based on the peer effects theory, this study constructs a fixed-effects model to empirically analyze the existence, heterogeneity, and action mechanism of peer effects in household carbon emission behavior, which uses panel data from the China Household Finance Survey (CHFS). The results indicate that peer effects have a significantly positive impact on residents’ carbon emission behavior, and the results are verified by the robustness test in various ways. Further mechanism tests show that peer effects influence carbon emission behavior through methods including the learning imitation mechanism and competitive imitation mechanism. In addition, we find that peer effects have different impacts on residents’ carbon emission behavior in varying regions, income levels, education levels, and ages groups. This study aims to embed residents’ carbon emission behavior into the strong relationship between surrounding groups, raise consumers low-carbon awareness through publicity, guidance, and group interaction, form a low-carbon atmosphere for the whole society, and contribute to the realization of Sustainable Development Goals.
Chapter
Rapid developments in technology and urgent requirement to reduce CO2 emissions to combat climate change improves offshore wind energy market. Electricity market in Turkey shows high dependency for import while it shares %10 from onshore wind. On the other hand, Turkey has approximately 70 GW offshore wind energy potential. However, changes in the global atmospheric circulation caused by human-induced global warming result in changes for the inter/ intra-annual variability of wind. Therefore, the latest generation and high-equilibrium CMIP6 climate models which are proven to be improved are used in this study to predict future offshore wind resource availability and variability for seas around Turkey. The wind speeds at 100 m, roughly represented as hub height are obtained by using hypsometric equation and shear exponent for each of 13 CMIP6 climate models. Then random forest-based regression (RF) method applied to 13 CMIP6 models are used to obtain multi-model ensemble prediction. In the analyses, historical CMIP6 period (1980-2014) is selected for train period and two different scenarios (SSP2-4.5 and SSP5-8.5) are used for test period (2014-2100). RF results showed higher correlation (> 0.85) than individual models (< 0.63) with reference data (ERA5) for all seasons. SSP2-4.5 scenario wind speeds are slightly higher than SSP5-8.5 at summer months for Marmara and Black Sea. According to RF predictions, wind speeds are expected to increase for near, mid and long period at summer months in the Black Sea (around % 10-20), spring months for Aegean Sea (around% 10) for both scenarios. Mediterranean Sea wind speeds are expected to decrease in the winter months and increase in fall by approximately 10 % for three periods.
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This synthesis discusses the emissions of carbon dioxide from fossil-fuel combustion and cement production. While much is known about these emissions, there is still much that is unknown about the details surrounding these emissions. This synthesis explores our knowledge of these emissions in terms of why there is concern about them; how they are calculated; the major global efforts on inventorying them; their global, regional, and national totals at different spatial and temporal scales; how they are distributed on global grids (i.e., maps); how they are transported in models; and the uncertainties associated with these different aspects of the emissions. The magnitude of emissions from the combustion of fossil fuels has been almost continuously increasing with time since fossil fuels were first used by humans. Despite events in some nations specifically designed to reduce emissions, or which have had emissions reduction as a byproduct of other events, global total emissions continue their general increase with time. Global total fossil-fuel carbon dioxide emissions are known to within 10 % uncertainty (95 % confidence interval). Uncertainty on individual national total fossil-fuel carbon dioxide emissions range from a few percent to more than 50 %. This manuscript concludes that carbon dioxide emissions from fossil-fuel combustion continue to increase with time and that while much is known about the overall characteristics of these emissions, much is still to be learned about the detailed characteristics of these emissions.
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Approximately one fourth of global emissions are embodied in international trade and a significant portion flows from non-carbon-priced to carbon-priced economies. Border carbon adjustments (BCAs) figure prominently as instruments to address concerns arising from unilateral climate policy. Estimating the volume of emissions that could be potentially taxed under a BCA scheme has received little attention until now. This paper examines how a number of issues involved in the implementation of BCAs can affect their ability to cover emissions embodied in trade and thus address carbon leakage. These issues range from ensuring compliance with trade provisions and assumptions on the carbon intensity of imports, to determining which countries are included and whether intermediate and final demand are considered. Here we show that the volume of CO2 captured by a scheme that involved all Annex B countries could be significantly reduced due to these issues, particularly by trade provisions, such as the principle of ‘best available technology’ (BAT). As a consequence, the tariff burdens faced by non-Annex B parties could dwindle considerably. These findings have important policy implications, as they question the effectiveness and practicalities of BCAs to reduce carbon leakage and alleviate competitiveness concerns, adding further arguments against their implementation.
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On 12 December 2015, the Parties to the UNFCCC adopted the "Paris Agreement". With this step, the world community has agreed on a collective and cooperative path to fight human-induced climate change: After 25 years of UN climate diplomacy, the world's governments have for the first time in history negotiated a treaty which envisages climate action by all nations. The Agreement sets the world on a path that might lead to a decarbonised economy in the second half of the century. Researchers from the Wuppertal Institute have observed COP 21 (as well as all other conferences) and elaborated a detailed analysis of the results (see downloads). The assessment - provides an overview of the most important negotiation outcomes, - assesses their results as well as shortfalls and - provides an outlook of the next steps needed to implement the Paris Agreement's goals and to set the world firmly on a non-fossil based development path.
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This paper uses a dynamic CGE model to assess the intertemporal and spatial dimension of technology spillovers embodied in international trade within a climate and trade policy framework. Three are the main contributions of the study. First, to include endogenous factor-biased technical change based on trade flows in a CGE model, particularly for energy and capital. Second, to analyse the implications of specific spillovers embodied in trade of capital goods (machinery and equipment), and third, to highlight the implications of accounting for indirect effects induced by spillovers. We find that explicitly modelling trade spillovers reveals significant effects thanks to the transmission mechanisms underlying imports of capital commodities. We then assess the net contribution of modelling trade spillovers within three policy scenarios. The aggregated net effects of spillovers are rather small confirming findings from previous studies. However, there are important international and intersectoral redistribution effects due to technology transfers represented as embodied spillovers.
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Climate change policy and the reduction of greenhouse gas emissions are currently discussed at all scales, ranging from the Kyoto Protocol to the increasingly frequent advertisement of ''carbon neutrality'' in consumer products. However, the only policy option usually considered is the reduction of direct emissions. Another potential policy tool, currently neglected, is the reduction of indirect emissions, i.e., the emissions embodied in goods and services, or the payments thereof. This book addresses the accounting of indirect carbon emissions (as embodied in international trade) within the framework of input-output analysis and derives an indicator of environmental responsibility as the average of consumer and producer responsibility. A global multi-regional input-output model is built, using databases on international trade and greenhouse gas emissions, from which embodied carbon emissions and carbon responsibilities are obtained. Carbon Responsibility and Embodied Emissions consists of a theoretical part, concerning the choice of environmental indicators, and an applied part, reporting an environmental multi-regional input-output model. It will be of particular interest to postgraduate students and researchers in Ecological Economics, Environmental Input-Output Analysis, and Industrial Ecology. © 2010 João Rodrigues, Alexandra Marques and Tiago Domingos. All rights reserved.