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Industry and globalisation

Carbon dioxide emissions embodied in international trade

 

Last updated: April 2019

The OECD Inter-Country Input-Output (ICIO) database, when combined with statistics on CO2 emissions from fuel combustion and other industry statistics, can be used to estimate demand-based CO2 emissions. That is, the distribution across economies of final demand (household consumption and industry investment) for embodied carbon that has been emitted anywhere in the world along global production chains. 

The Trade in embodied CO(TECO2) database presents a set of indicators to reveal patterns of CO2 demand compared to CO2 production (via resident industry or household emissions). The aim is to provide policy makers with new insights into the environmental impacts of global production systems.  Indicators presented in TECO2 database include:

 

  • COemissions based on production (i.e. emitted by countries)
  • COemissions embodied in domestic final demand (i.e. consumed by countries)
  • Net exports of COemissions
  • Per capita emissions; production and demand-based
  • Country origin of emissions in final demand

 

Data downloads (country level): OECD.Stat

 

The six largest producers and consumers of CO2 emissions in 2015 were China, United States, European Union (EU28), India, Japan and the Russia Federation. While both production and consumption of emissions have fallen in the United States and the European Union since 2005, there has been a significant increase in China and India. China has the highest absolute emissions from both a demand and a production perspective. However, even though China’s per capita demand for CO2 emissions has increased by over 75% since 2005, US per capita demand is over three times higher.

 

Top 6 carbon dioxide emitters, 2005 and 2015

CO2 emissions Top 6 producers

Source: OECD (2019), CO2 emissions embodied in international trade, http://oe.cd/io-co2.

 

The difference between production-based and demand-based carbon emissions is highlighted in the graph below. While the OECD countries in total are net-importers of embodied carbon (the solid blue line representing demand-based emissions is above the dashed blue line representing production-based emissions), the non-OECD countries, as a whole, are net-exporters. Note that the shaded blue area (OECD net imports) and green area (non-OECD net exports) have the exact same size, i.e. OECD net-imports are non-OECD net-exports of embodied carbon. Net-imports by the OECD countries have gradually been falling since 2005.

 

CO2 Emissions-OECDvsNon-OECD

 

Not all OECD countries are net-importers of carbon and similarly, not all non-OECD countries are net-exporters. For example, in the OECD, Canada, Korea and the Netherlands were net-exporters in 2015 while among non-OECD economies, Argentina and Brazil were net importers. Among OECD and G20 countries, the average of the three countries with highest per capita demand-based emissions (Australia, Saudi Arabia and United States, 18.3 tonnes CO2) is nearly ten times higher than that of the three countries with lowest per capita emissions (Brazil, Indonesia and India, 1.9).

 

CO2 Emissions-PerCapita

 

Methodology

Demand-based emissions are calculated using IEA data on “CO2 emissions from fuel combustion” and the OECD Inter-Country Input-Output (ICIO) system (edition 2018). Using information from both, emission-intensities of production are calculated for each industry in each country. These intensities are then combined with the Leontief inverse of the ICIO system to get emission multipliers for final demand.

The carbon emissions associated with final demand FD_CO2 are calculated as follows:

CC = diag(EF) (I-A)-1 Y

 

where diag(EF) is the the diagonalised matrix form of vector EF of industry emissions per unit of production (i.e. emission factors) by country, of size KN (K*N) where K = number of industries and N = number of countries. The fuel purchased abroad by domestic airlines and marine water transport industries are now included from the 2019 edition of embodied CO2A is the global intermediate coefficients matrix so that (I-A)-1 is the global Leontief inverse (both of size KN x KN), and Y is the global final demand matrix of size KN x N.

The rows in the result matrix CC, of size KN x N, represent the country and industry origins of emissions, while the columns represent the final demand countries where the emissions are consumed.

Total CO2 embodied in final demand by country is then estimated as follows:

FD_CO= colsum(CC) + FNLC

where colsum(CC) is a 1 x N vector of total emissions embodied in the consumption and investment of final goods and services by domestic industries and households, while FNLC is 1 x N vector of direct emissions due to the combustion of utility and transport fuels by households. To ensure that all emissions are taken into account, these emissions need to be added to that of matrix CC. Similarly, to account for all production-based emissions, FNLC needs to be added to the rows of CC (distributed primarily to the manufacture of petroleum products and the electricity, gas and water supply industries).

 

Reference:

Wiebe, K. S. and N. Yamano  (2016), "Estimating CO2 Emissions Embodied in Final Demand and Trade Using the OECD ICIO 2015: Methodology and Results". OECD Science, Technology and Industry Working Papers, No. 2016/5, OECD Publishing, Paris.

 

Any suggestions or queries can be sent to stan.contact@oecd.org, mentioning CO2 in the title of your message. 

Please cite as: OECD, Trade in Embodied CO2 Database (TECO2), April 2019. 

 

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