Uncovering embodied CO2 flows via North-North trade - A case study of US-Germany trade.

Abstract

With development of globalization, the geographic separation of production caused consumption of a region was linked to pollution emitted by another region. In this process, dramatic growth of CO2 emissions embodied in international trade attracted attention of relevant studies. Existing literatures have paid much attention on the empirical research of CO2 flows between developed and developing countries, while studies of CO2 emissions embodied in North-North trade were often overlooked. To partly fill the research gap, the study assessed CO2 emissions embodied in Germany-US trade during 2000-2015, which was viewed as an example of the empirical research on CO2 flows in North-North trade. On the basis of the estimation, we conducted a structural decomposition analysis on CO2 emissions embodied in Germany-US trade. The decomposition focused on five driving forces that dominated the change of CO2 emission flows. The result showed that Germany ran both the surplus of export CO2 emissions and surplus of trade volume with the US. The share of Germany-US export CO2 emissions to total export CO2 emissions of Germany was greater than US-Germany export CO2 emissions to total export CO2 emissions of the US, which, to some extent, indicated significance of the US in Germany's external trade was greater than importance of Germany in overseas trade of the US. Decline of the two ratios above showed a trend of transferring CO2 emissions to developing countries by the two countries. By comparison of sectoral CO2 distribution, the categories of "manufacturing" and "services" dominated most emissions in the trade. According to structural decomposition analysis, CO2 emission intensity and per capita final consumption caused most growth and reduction of emissions in the first 10 years, while in the next 5 years production structure of two countries played the most important role in change of embodied emissions. And the trend seemed to continue in the future.