Lowering tariffs on imports stimulates greater trade between nations but can increase carbon dioxide emissions. Abolishing tariffs for Group of Twenty (G20) member states would bring the greatest impact to Saudi Arabia, where carbon emissions embodied in imports would rise by 232%, according to researchers in Japan.
“If environmental policies do not account for the emissions embodied in imports, global emissions are likely to rise,” write Moinul Islam and colleagues at Kyushu University and the Research Institute for Humanity and Nature in their paper in Environmental Research Letters (ERL).
Islam and colleagues expect their results to help formulate trade policies that minimize greenhouse gas emissions for all parties. Until now, most nations and corporations have not considered embodied emissions, as they do not affect the cost of goods.
“Universal carbon taxes have been suggested to correct this,” says Shunsuke Managi. “Once introduced, firms will be motivated to seek alternative, less carbon-intensive trade partners, and total emissions will be reduced.”
Currently, governments can apply tariffs to specific commodities to protect their own industries within domestic markets. Outside specific trade agreements, however, the World Trade Organization (WTO) obliges member states to apply any given tariff to all nations without exception.
Apart from the continuing trade war between China and the US, import tariffs have generally decreased over the last few decades. Since trade boosts the global economy, this is usually seen as a positive development. Wealthier nations can also benefit in a second way: polluting industries tend to relocate to less economically developed countries, where regulations are often less stringent, bringing improvements in the wealthy nation’s local environment.
Less often considered is how trade barriers influence the carbon dioxide emissions embodied in a nation’s imports. Yet accounting for changes related to tariff regimes in this embodied carbon is crucial to planning national carbon-reduction commitments.
Estimating the emissions embodied in imports is hard because of the complexity and scale of global supply chains. Islam and colleagues turned to a continuously updated list of carbon dioxide outputs for hundreds of commercial sectors across 187 countries. From this, they compiled embodied emissions for mined and manufactured goods imported to the G20 countries between 1990 and 2013. They compared these embodied emissions to tariffs applied over the same period.
Lowering tariff barriers to trade would increase emissions embodied in imports overall, the researchers found. Economic activity is currently still coupled to carbon dioxide output, so anything that raises gross domestic product tends also to raise emissions.
The detailed picture depends on a number of additional variables, however, including the nature of a given nation’s imports, and the size of tariffs currently applied. Countries with high tariffs on carbon-intensive products are likely to see import-embodied emissions rise drastically under conditions of free trade.
Also important is the size – both geographically and economically – of the importing country. “Consumption in larger countries is greater than consumption in smaller countries,” says Keiichiro Kanemoto. “It is easy to imagine that New York imports more products – like iPhones from China – than Philadelphia does. We can say the same thing at the country level.”
Perhaps less obvious is the effect of distance between the source and destination countries. Although long-distance transport is more carbon-intensive than local trade, it also adds to the cost of the product, suppressing demand. This means that lowering tariffs on goods traded over long distances increases embodied emissions less than it does for more local routes.
Islam, Managi, Kanemoto and colleagues reported their findings in Environmental Research Letters (ERL).
