Mineral Economics

, Volume 24, Issue 2–3, pp 103–117 | Cite as

Who should bear the cost of China’s carbon emissions embodied in goods for exports?

  • ZhongXiang ZhangEmail author
Original Paper


China’s capital-intensive, export-oriented, spectacular economic growth since launching its open-door policy and economic reforms in late 1978 not only has created jobs and has lifted millions of the Chinese people out of poverty, but also has given rise to unprecedented environmental pollution and CO2 emissions. While estimates of the embedded CO2 emissions in China’s trade differ, both single-country studies for China and global studies show a hefty chunk of China’s CO2 emissions embedded in trade. This portion of CO2 emissions had helped to turn China into the world’s largest carbon emitter, and is further widening its gap with the second largest emitter. This raises the issue of who should be responsible for this portion of emissions and bearing the carbon cost of exports. China certainly wants importers to cover some, if not all, of that costs. While China’s stance is understandable, this paper has argued from a broad and balanced perspective that if this is pushed too far, it will not help to find solutions to this issue. On the contrary, it can be to China’s disadvantage for a number of reasons. However, aligning this responsibility with China does not necessarily suggest the sole reliance on domestic actions. In that context, the paper recommends specific actions that need to be taken internationally as well as domestically in order to effectively control the embedded CO2 emissions in China’s trade.


Carbon emissions embodied in trade Consumption-based accounting Production-based accounting Processing trade Carbon tariffs Energy policy 

JEL classification

F18 P28 Q42 Q43 Q48 Q53 Q54 Q56 Q58 



I initially talked about the issues related to consumption-based CO2 emissions at the US National Intelligence Council Project’s Conference on Climate Change and its Implications through 2020, University of Maryland at College Park, June 28, 2004. The views in this paper in part or whole were also presented at the International Conference on Economic Policy Simulation and Technological Innovation, A Chinese Academy of Social Sciences Forum, Beijing, November 5-6, 2011 and expressed in a series of the seminars in National Climate Center of China Meteorological Administration, the Chinese Academy of Sciences, the Chinese Academy of Social Sciences, Energy Research Institute of the National Development and Reform Commission, Peking University and Tsinghua University, Beijing, China. That said, they are those of the author. The author bears sole responsibility for any errors and omissions that may remain.


  1. Ahmad N, Wyckoff A (2003) Carbon dioxide emissions embodied in international trade of goods. OECD DSTI/DOC(2003)15, Organisation for Economic Co-operation and Development, NovemberGoogle Scholar
  2. Bacchus J (2010) Hoarding resources threatens free trade: a case against China at the WTO is a sign of an emerging new arena for conflict. Wall Street Journal, 19 MayGoogle Scholar
  3. Ball P (2009) Who should bear the carbon cost of exports?. Nature, 6 March, available at:
  4. Ballesteros A, Polycarp C, Stasio K, Chessin K, Easton C (2011) Summary of developed country ‘fast-start’ climate finance pledges. World Resources Institute, Washington, DC, 20 MayGoogle Scholar
  5. Bradsher K (2011) Chasing rare earths. New York Times, 25 AugustGoogle Scholar
  6. Chakravarty S, Chikkatur A, de Conink H, Pacala S, Socolow R, Tavoni M (2009) Sharing global CO2 emission reductions among one billion high emitters. Proc Natl Acad Sci 106(29):11884–11888CrossRefGoogle Scholar
  7. Chapagain AK, Hoekstra AY (2003) Virtual water flows between nations in relation to trade in livestock and livestock products. Value of Water Research Report Series No. 13, UNESCO-IHE, Delft, The NetherlandsGoogle Scholar
  8. China Daily (2009) China wants importers to cover emission costs. 17 March, available at:
  9. Davis SJ, Caldeira K (2010) Consumption-based accounting of CO2 emissions. Proc Natl Acad Sci 107(12):5687–5692CrossRefGoogle Scholar
  10. Environmental Investigation Agency (2005) Illegal logging in Papua and China’s massive timber theft. London, available at:
  11. Gallagher KG, Porzecanski R (2010) The dragon in the room: China and the future of Latin American industrialization. Stanford University Press, CaliforniaGoogle Scholar
  12. Greenpeace (2006) Sharing the blame: global consumption and China’s role in ancient forest destruction. March, available at:
  13. Harrison A, Vitalis V, Upton S (2003) Sustaining whose development? Analysing the international effect of national policies. OECD Roundtable on Sustainable Development, Organisation for Economic Co-operation and Development, NovemberGoogle Scholar
  14. Hoekstra AY, Hung PQ (2002) Virtual water trade: a quantification of virtual water flows between nations in relation to international crop trade. Value of Water Research Series No. 11, UNESCO-IHE, Delft, The NetherlandsGoogle Scholar
  15. Hook L, Hille K (2011) Apple attacked over pollution in China. Financial Times, 31 AugustGoogle Scholar
  16. Houser T, Bradley R, Childs B, Werksman J, Heilmayr R (2008) Leveling the carbon playing field: international competition and U.S. climate policy design. Peterson Institute for International Economics and World Resources Institute, Washington, DCGoogle Scholar
  17. IEA (2007) World energy outlook 2007. International Energy Agency (IEA), ParisGoogle Scholar
  18. Krugman P (2009) Chinese new year. New York Times, 31 December, available at:
  19. Mattoo A, Subramanian A, van der Mensbrugghe D, He J (2009) Reconciling climate change and trade policy. World Bank Working Paper No. 5123, Washington, DC, NovemberGoogle Scholar
  20. Ministry of Commerce of China (2009) A statement on ‘carbon tariffs’. Beijing, 3 July, available at:
  21. Ministry of Commerce of China and the State Environmental Protection Agency (2007) A circular on strengthening the environmental supervision of export-engaged enterprises. 8 October, Beijing, available at:
  22. Ministry of Finance of China and the State Administration of Taxation (2007) A circular on lowering export tax rebates for some products. 18 June, Beijing, available at:
  23. National Development and Reform Commission (2007) Commissioner Ma Kai responded to climate issues at a press conference organized by the Information Office of the State Council. 4 June, available at:
  24. National Development and Reform Commission (NDRC), Ministry of Finance, Ministry of Commerce, and the General Administration of Customs (2009) Imports of automobile parts levied at the uniform rate of 10% since 1 September. 30 August, Beijing, available at:
  25. Netherlands Environmental Assessment Agency (2007) China now no. 1 in CO2 emissions; USA in second position. 19 JuneGoogle Scholar
  26. Pan J, Phillips J, Chen Y (2008) China’s balance of emissions embodied in trade: approaches to measurement and allocating international responsibility. Oxford Rev Econ Policy 24(2):354–376CrossRefGoogle Scholar
  27. Peters GP, Hertwich EG (2008) CO2 embodied in international trade with implications for global climate policy. Environ Sci Technol 42:1401–1407CrossRefGoogle Scholar
  28. Peters GP, Minx JC, Weber CL, Edenhofer O (2011) Growth in emission transfers via international trade from 1990 to 2008. Proc Natl Acad Sci 108(2):8903–8908CrossRefGoogle Scholar
  29. Peters GP, Weber CL, Guan D, Hubacek K (2007) China’s growing CO2 emissions: a race between increasing consumption and efficiency gains. Environ Sci Technol 41:5939–5944Google Scholar
  30. Reuters (2007) China’s demand for hardwood drives illegal logging, says Greenpeace. 17 April, available at:
  31. Schatan C, Castilleja L (2007) The Maquiladora electronics industry on Mexico’s northern border and the environment. Int Environ Agreem-p 7(2):109–135CrossRefGoogle Scholar
  32. Shen J, Hou L, Lei Z (2008). WTO rules for the first time China’s violation of its trade provisions. 14 February, available at:
  33. Shui B, Harriss RC (2006) The role of CO2 embodiment in US-China trade. Energy Policy 34:4063–4068CrossRefGoogle Scholar
  34. Sina Net (2008) Special topic on over one hundred of multilateral corporations blacklisted for violating the environmental regulations in China. Available at:
  35. Staiger RW, Sykes AO (2010) ‘Currency manipulation’ and world trade. World Trade Review 9(4):583–627CrossRefGoogle Scholar
  36. Streets DG, Yu C, Bergin MH, Wang X, Carmichael GR (2006) Modeling study of air pollution due to the manufacture of export goods in China’s Pearl River Delta. Environ Sci Technol 40(7):2099–2107CrossRefGoogle Scholar
  37. The Economist (2008) Chinese torture. 7 June, p. 66Google Scholar
  38. The Economist (2009a) Green with envy: the tension between free trade and capping emissions. 21 November, p. 80Google Scholar
  39. The Economist (2009b) Climate change talks - wanted: fresh air. 11 July, pp. 60–62Google Scholar
  40. U.S. EIA (2004) International energy outlook 2004. U.S. Energy Information Administration (EIA), Washington, DCGoogle Scholar
  41. U.S. House of Representatives (2009) H.R. 2998. 23 June, available at:
  42. United Nations Conference on Trade and Development (UNCTAD) (2011) Global imbalances: the choice of the exchange rate-indicator is key. UNCTAD Policy Briefs No.19, UNCTAD/PRESS/PB/2011/1, available at:
  43. United Nations Statistic Division (2010). National accounts main aggregates database. Available at:
  44. Weber CL, Peters GP, Guan D, Hubacek K (2008) The contribution of Chinese exports to climate change. Energy Policy 36:3572–3577CrossRefGoogle Scholar
  45. World Bank (2010) World development indicators 2010. Washington, DCGoogle Scholar
  46. World Trade Organization (WTO) (2009) China – measures affecting imports of automobile parts. DS340, available at:
  47. World Trade Organization (WTO) (2011) China - measures related to the exportation of various raw materials. DS394, 5 July, available at:
  48. Wyckoff AW, Ropp JM (1994) The embodiment of carbon in imports of manufactured products: implications for international agreements on greenhouse gas emissions. Energy Policy 22(3):187–194CrossRefGoogle Scholar
  49. Xin Y (2011) Processing trade, exchange rates, and the People’s Republic of China’s bilateral trade balances. Asian Development Bank Institute Working Paper 270, TokyoGoogle Scholar
  50. Zhang ZX (1997) The economics of energy policy in China: implications for global climate change. New Horizons in Environmental Economics Series. Edward Elgar, Cheltenham, UK and Northampton, USAGoogle Scholar
  51. Zhang ZX (2007a) China’s reds embrace green. Far Eastern Economic Review 170(5):33–37Google Scholar
  52. Zhang ZX (2007b) Why has China not embraced a global cap-and-trade regime? Climate Policy 7(2):166–170Google Scholar
  53. Zhang ZX (2009) Multilateral trade measures in a post-2012 climate change regime?: what can be taken from the Montreal Protocol and the WTO? Energy Policy 37:5105–5112CrossRefGoogle Scholar
  54. Zhang ZX (2010a) Is it fair to treat China a Christmas tree to hang everybody’s complaints? Putting its own energy-saving into perspective. Energy Economics 32:S47–S56CrossRefGoogle Scholar
  55. Zhang ZX (2010b) The U.S. proposed carbon tariffs, WTO scrutiny and China’s responses. International Economics and Economic Policy 7(2–3):203–225CrossRefGoogle Scholar
  56. Zhang ZX (2010c) China in the transition to a low-carbon economy. Energy Policy 38:6638–6653CrossRefGoogle Scholar
  57. Zhang ZX (2011a) Assessing China’s carbon intensity pledge for 2020: stringency and credibility issues and their implications. Environmental Economics and Policy Studies 13(3):219–235CrossRefGoogle Scholar
  58. Zhang ZX (2011b) In what format and under what timeframe would China take on climate commitments? A roadmap to 2050. Int Environ Agreem-p 11(3):245–259CrossRefGoogle Scholar
  59. Zhang ZX (2011c) Energy and environmental policy in China: towards a low-carbon economy. New Horizons in Environmental Economics Series. Edward Elgar, Cheltenham, UK and Northampton, USAGoogle Scholar

Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Research Program, East–West CenterHonoluluUSA
  2. 2.Center for Energy Economics and Strategy Studies; and Research Institute for the Changing Global EnvironmentFudan UniversityShanghaiChina
  3. 3.Institute of Policy and ManagementChinese Academy of SciencesBeijingChina
  4. 4.China Centre for Urban and Regional Development ResearchPeking UniversityBeijingChina
  5. 5.Centre for Climate Economics and Policy, Crawford School of Economics and GovernmentThe Australian National UniversityCanberraAustralia

Personalised recommendations