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Five researchers from two Vi university members in India and Russia have completed a joint paper exploring the linkages between international trade and carbon leakage -- the increase in carbon dioxide emissions in some countries as a result of the adoption of strict environmental policies in others.

The Vi joint research project, funded by the Government of Japan, includes recommendations for national and international policies to reduce future emissions, and facilitate the negotiating process for signing a new international climate agreement.

 

After the signing of commitments to reduce their emissions of greenhouse gases, such as the Kyoto Protocol, some developed countries have increased their imports of carbon-intensive goods from developing or transition countries that do not have the obligation to reduce such emissions. This "leakage," in turn, risks to offset (at least partially) efforts of the international community to curb emissions.

"International trade and carbon leakage: An analytical framework for India and Russia," was developed by Meeta Mehra Keswani, Aparna Sawhney and Rashmi Rastogi, of Jawaharlal Nehru University in India, and Natalia Piskulova and Anna Abramova, of the Moscow State Institute of International Relations in Russia, with support from the Vi team. The paper was peer reviewed by Robert Hamwey, of UNCTAD's Trade, Environment, Climate Change and Sustainable Development Branch, and Piergiuseppe Fortunato, of UNCTAD's Unit on Economic Cooperation and Integration among Developing Countries, and  co-author of the UNDESA World Economic and Social Survey 2009 (focusing on climate change).

"This paper is extremely useful in that it clearly explains how to quantify CO2 emissions that are embedded in a country's trade, demonstrating in quantitative terms the net carbon balance in bilateral trade flows between India and Russia and their main trading partners," writes Hamway.

The authors propose a methodological framework for the calculation of carbon leakage in the context of merchandise trade between these two emerging economies (which do not have obligations to cut greenhouse gas emissions) and their major developed trading partners. They subsequently conduct an estimation of CO2 embodied in such trade, finding that carbon emissions embodied in Indian and Russian exports to these trading partners were higher than those in their imports, with the exception of the trade between Russia and Germany.

"The paper convincingly argues that, due to carbon leakage, future international agreements imposing emissions reduction targets on countries should take into account future emissions calculations based on national consumption, rather than, or in conjunction with, production," Hamway said.

The problem of carbon leakage, according to the authors, needs to be addressed through sound policies aiming to improve energy efficiency, induce the use and transfer of clean technologies, and develop new sources of energy. In this regard, the paper recognizes the importance of domestic policies to reduce carbon leakage, and analyzes in detail the main measures adopted in India and Russia.

As a truly global problem, climate change will eventually require the adoption of effective international policies and participation by all countries. Along these lines, the authors argue for the application of more cooperative international policy measures that, coupled with revised emissions accounting, may facilitate the diffusion of green technologies without hindering the development perspectives of poor countries. Such policies include a new agreement with emissions reduction obligations evaluated according to each country's characteristics, and more significant financial assistance to developing countries to allow them to change their production pattern and ensure enough energy supply to meet their development needs.

Read the paper

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