Final consumer embedded carbon emissions and externalities: A case of Chinese consumers

Abstract

Traditional consumption-based approaches seek to embed emissions from industrial production into different categories of final demand, with or without capital formation endogenization. However, not many studies have considered estimating final consumer embedded emissions, which can be calculated by endogenizing all final demand categories except for final consumers. Endogenization refers to the process of converting a final demand category to an intermediate industrial producer. In addition, this lack of literature has also led to a lack of focus on final consumer embedded carbon externalities. Here the authors modify the input-output model to endogenize additional final demand categories and develop a method for presenting final consumer embedded net carbon externalities. The findings show that the endogenization of both capital formation and final imports increased the Chinese household carbon footprint by 33%. While endogenizing these two final demand categories increased the carbon footprint of the Chinese government by 14%. The Chinese government imposed net carbon externality on Chinese households by consuming products of thirteen different sectors. Urban households levied net carbon externality on rural households by end-use of all sectors. This presentation of final consumer embedded emissions provides the final consumer's actual carbon footprint from all sources. In addition, presenting net embedded carbon externalities can help develop a more effective and fair mechanism for assigning responsibility for embedded emissions between different types of end-users.