Kyoto and the carbon footprint of nations

Abstract

The carbon footprint of a country refers to the flow of CO2 emissions caused by domestic absorption (i.e., consumption and investment) activities. Trade in goods drives a wedge between the footprint and domestic emissions. We provide a new panel database on carbon footprints and carbon net trade. Using a first-differenced IV estimation strategy, we evaluate the effects of ratification of binding Kyoto commitments on the carbon footprint and emissions. Instrumenting countries' Kyoto commitment by their participation in the International Criminal Court, we show that Kyoto commitment has reduced domestic emissions in committed countries by about 7%, has not lowered carbon footprints, but has increased the share of imported over domestic emissions by about 14 percentage points. It follows that the Kyoto Protocol has had at best no effect on world-wide emissions. The results highlight the difficulties of unilateral climate policies.