Carbon Emissions Embodied in India–United Kingdom Trade: A Case Study on North–South Debate

Abstract

This study is an appraisal of North–South trade and environmental debate on the context of ‘carbon leakage hypothesis’. This article attempts to quantify the CO2 emissions embodied in the bilateral trade between India and the United Kingdom (hereafter mentioned as the UK) using an input–output model-based analysis for the year 2015. It further proposes a hypothetical situation of no trade between India and UK in order to calculate and analyse the contribution of this bilateral trade in global CO2 emissions. The results from this study confirm the possibility of ‘carbon leakage’ from Indian commodity production sectors and find that among two trade partners, the UK is able to avoid more carbon emissions than India through trade which helps the UK to reach their carbon emission mitigation targets. On the average, manufacturing of commodities in India those are to be exported to the UK generates 1.053 kilo-tonnes of CO2 emission per million dollars of export annually and manufacturing of commodities in the UK which are imported to India generates only 0.141 kilo-tonnes of CO2 emission per million dollars of import from the UK annually for the years 2011, 2013 and 2015. This is because of the proportionately higher consumption of more emission-intensive energy items, like coal, and coal products by India in industrial production than the UK. At the end of the article, this study proposes a few suggestions to ensure a decent level of emission imbalance in the trade flows for the anticipation of increasing India–UK bilateral trade in coming days due to post-BREXIT eventualities to reduce the pressure on the global environment. JEL Codes: C67, F64, Q37, Q42