Climate Change Crisis: Rethinking Carbon Accountability

In the 21st century, environmental degradation and climate change have become severe hazards to human health and the ecosystem. Now environmental concerns are receiving a greater attention from global institutes, academics and researchers. The primary source of environmental degradation has been identified as greenhouse gases (GHGs) with a higher carbon dioxide (CO₂) intensity. To address the worldwide challenge of environmental change, many environmental commitments are signed. For example, the “Kyoto Protocol and the Paris Climate Agreement” were signed in 1997 and 2015, respectively. The main purpose of these initiatives is to restrict the increase of global temperature below two degrees centigrade. The fact that global warming is increasing, due to the increased CO₂ emissions has inspired research scholars and policymakers to correctly address the issue of CO₂ emissions.

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Accurate measurement of CO₂ emissions is crucial for devising a suitable climate strategy to manage ecological concerns. There are two measures of CO₂ emissions one is called production-based (PB) CO₂emissions_, and the second one is known as consumption-based (CB) CO₂emissions. The PB CO₂ emissions represent the direct emissions of a country, and the literature has paid excessive attention to this measure to address environmental concerns. Contrary to this, the CB CO₂ emissions measure representing the trade-adjusted emissions has received fewer considerations in the empirical works. An appropriate climate action could be managed following the outcomes of trade altered CO₂ measure.

The “Intergovernmental Panel on Climate Change” (IPCC, 2006) highlights that when an economy, located in a specific region, manages its all consumption through imports, emissions are reduced to zero in that region. Thus, the real issue is the dispersal of trade-induced CO₂emissions. Consider the following example, when France imports a vehicle manufactured in Japan, the issue arises that a distribution of emissions between Japan (producer) and France (consumer) requires some criteria. Such a complex issue has attracted the worldwide attention of academics and policymakers. Hence, policy managers are searching for an appropriate metrics for emissions allocation between international producers and consumers and striking a stable equilibrium between trade growth and associated CO₂ emissions.

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During the previous years, several developed economies have observed a major decline in PB CO₂ emissions along with sustainable development performance. Nevertheless, it is observed a decline in PB carbon is the outcome of the “pollution haven hypothesis” or “carbon leakages”, instead of real decline in CO₂ emissions. Observing a real decline requires analyzing and determining the “decoupling versus displacement” debate. In this regard, CB CO₂ emissions are considered a suitable option. The emissions are adjusted in the following way. The emissions associated with exported goods are subtracted from domestic emissions for a given country, while emissions associated with imports are added. On the other hand, production-based (PB) CO₂ emissions do not incorporate such improvements. According to a few authors, all consumers and suppliers of products are liable for carbon production, and they must bear alleviation obligations proportionally. However, how this liability can be allocated remains an ongoing debate among researchers and policymakers.

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This article was contributed by: Mr Najibullah, a PhD scholar at IBA, Karachi. He completed his MPhil in Economics from Quaid-i-Azam University, Islamabad, where he conducted research in environmental economics. He has also taught Environmental Economics at the bachelor’s level at QAU, Islamabad. najibullah@iba.edu.pk