Emission transfers: Pathways to global climate policy

Global CO2 emissions reached a new high in 2013. One solution to curb them is emission transfers. Oldenburg economist Marco Springmann examines how these transfers can be integrated into international climate policy.

CO2 emissions are rising and driving the greenhouse effect further. Among other things, emissions in developing and emerging countries that are blown into the air for products that are placed on the market and consumed in industrialised countries are to blame. In the past two decades, indirect emission transfers caused by trade between industrialised and emerging countries have increased fourfold: from 0.4 gigatonnes of CO2 in 1990 to 1.6 gigatonnes in 2008. Against this backdrop, what does responsible climate policy look like? What can the industrialised nations do? Marco Springmann, economist at the University of Oldenburg, explored these questions in his article "Integrating Emissions Transfers into Policy-making". It has now been published online in the scientific journal "Nature Climate Change" - a publication from the publishing group of the renowned scientific journal "Nature". Springmann proposes that industrialised nations offset the emissions attributable to their consumption by investing in environmentally friendly developments in developing countries. "This would result in industrialised nations strengthening global climate policy and contributing to a fair distribution of the burden of CO2 emissions," says the economist.

Global CO2 emissions reached a new high in 2013: although industrialised countries were able to stabilise their own greenhouse gas emissions, emissions attributable to their consumption are increasing at an alarming rate. International trade plays a central role in this. It enables the import of energy and emission-intensive goods from developing and emerging countries to industrialised countries. At the same time, industrialised nations are not taking responsibility for local CO2 emissions. This problem of so-called emission transfers has been recognised for years. However, until now there has been a lack of concrete proposals on how international emission transfers can be embedded in current climate policy.

In his article, Springmann now analyses the economic and environmental effects of three scenarios that integrate emission transfers into current climate policy in different ways: First, there is the offsetting of emission transfers through stricter emission reduction targets in industrialised countries. In a second scenario, the price of trade goods in industrialised countries is adjusted through CO2 tariffs on imported goods and the exemption of CO2 prices for exported goods. The third is based on offsetting emission transfers through the financing of environmentally friendly developments in developing countries.

The author analyses the scenarios by using a global trade model that maps international economic relations and the resulting CO2 emissions. This shows that offsetting emission transfers through the financing of environmentally friendly developments in developing countries is the most promising option, both economically and ecologically. It reduces global CO2 emissions comparatively the most and is up to a third more cost-efficient than the other options. In order to initially offset the energy-intensive emission transfers - which account for around 20 per cent of all emission transfers - an investment of around three billion US dollars would be required - that is less than 0.01 per cent of the economic output of all industrialised nations. Offsetting all emissions transfers to industrialised nations would require around 50 billion US dollars or 0.1 per cent of the economic output of all industrialised nations.

According to Springmann, the other options are either considerably more expensive or have hardly any impact on global CO2 emissions. Stricter emissions targets without financial compensation could therefore cause immense damage to the economies of both industrialised and developing countries. The reason for this is that stricter emissions targets would result in a price increase in the industrialised nations. This would lead to an increase in export prices and reduce consumption and demand for goods from developing countries. "A rigid equalisation of emissions transfers without flexible compensation mechanisms would probably be more harmful than beneficial - both nationally and globally," says Springmann. A price adjustment of trade goods by means of CO2 tariffs could be of interest to the industrialised nations. However, the economic damage for developing countries would be disproportionate to the reduction in emissions and the political upheaval that such a policy could entail.

Springmann points out: "An ambitious global climate agreement would certainly be the best solution to close the current emissions loopholes. But it may be some time before this is achieved in the global climate negotiations. Linking climate finance in developing countries with emission transfers and broader emission responsibility of industrialised countries offers the opportunity to strengthen current climate policies and contribute to real and affordable emission reductions."

Springmann, Marco: "Integrating Emissions Transfers into Policy-making" in "Nature Climate Change" (http://dx.doi.org/10.1038/nclimate2102)