In 2011, China ranked as the world’s largest exporter, as well as the world’s largest energy consumer and source of carbon emissions. As China's leaders discuss ways to reduce the energy intensity of the country's economic activity, including its exports, Joint Program researchers analyze the potential impact of related policy measures on emissions in China and the global total.

Emissions from export activities made up 22 percent of China’s total emissions. Europe (360 million metric tons), the U.S. (337 million metric tons) and Japan (109 million metric tons) account for the largest share of these export-embodied emissions. Most of China’s emissions come from the production of machinery and equipment, not energy-intensive products like steel and aluminum. This is because machinery and equipment accounts for a large share of China’s total exports and, after accounting for emissions from electricity purchases, is moderately emissions intensive. 

In this analysis, researchers consider two policies in China. The first is an increase in the tariff on energy-intensive exports from China, which is used to simulate a reduction in export tariff rebates. The second policy involves incentivizing a shift in China’s economy away from industry and toward services. In exploring these policies—both of which are advertised as carbon-reducing strategies—researchers find that neither would have a significant impact on total global emissions because reduced production in China is partially offset by increased production elsewhere. A policy that targets the expansion of domestic demand is more effective at reducing China’s export-embodied CO2 emissions, in turn reducing China’s exposure to potential tariffs on embodied carbon imposed overseas. But such a move would also shift production of many industrial products to other nations, shifting emissions along with them.

Abstract:

We calculate carbon dioxide (CO₂) emissions embodied in China's net exports using a multi-regional input–output database. We find that the majority of China's export-embodied CO₂ is associated with production of machinery and equipment rather than energy-intensive products, such as steel and aluminum. In 2007, the largest net recipients of embodied CO₂ emissions from China include the EU (360 million metric tons, mmt), the US (337 mmt) and Japan (109 mmt). Overall, annual CO₂ emissions embodied in China's net exports totaled 1177 mmt, equal to 22% of China's total CO₂ emissions. We also develop a global general equilibrium model with a detailed treatment of energy and CO₂ emissions. We use the model to analyze the impact of a sectoral shift in the Chinese economy away from industry and towards services, both without and with a decrease in China's trade surplus, and a tax on energy-intensive exports, which reflect policy objectives in China's Twelfth Five-Year Plan (2011–2015). We find that without a decrease in the trade surplus, both policies will have a limited impact on China's net exports of embodied CO₂ emissions. The policies have an even smaller effect on global emissions, as reduced production in China is partially offset by increased production elsewhere.