Carbon emissions embodied in the global supply chain: Intermediate and final trade imbalances

Abstract

By differentiating intermediate trade from final trade, this paper combines typical statistics for the world economy in 2012 to explore the transfer of embodied carbon emissions via the global supply chain and the related trade imbalance. The emission transfer embodied in interregional trade is in magnitude around 40% of global direct carbon emissions. The global intermediate trade volume of embodied carbon emissions is estimated to be 2.3 times as much as the final trade volume. While Mainland China obtains a considerable economic trade surplus, its carbon trade deficit is about twice the carbon trade surplus of the United States. Mainland China's final trade deficit is around 1.2 times as much as its intermediate trade deficit of embodied carbon emissions. EU27, the United States, ASEAN and Japan serve as the major contributors to China's intermediate and final trade deficits. For the United States, its intermediate carbon trade surplus is almost equal to its final trade surplus. The United States gains a carbon surplus with most of its trading partners in both intermediate and final trades. A future scenario analysis in terms of carbon emission projection is conducted. While the direct and embodied carbon emissions of the United States and Japan are estimated to change slightly from 2012 to 2040, India's carbon emissions are projected to experience a twofold increase during the period. In the long term, though with ups and downs, the economic globalization will be inevitably moving forward, leading to a highly sliced-up global supply chain and increasingly delicate regional specialization as well as frequent intermediate trade between regions. It is suggested that nations and regions should follow this trend and adapt themselves to the global value chain by carefully assessing their roles in intermediate and final trades in terms of both currency and embodied carbon emissions.

Keywords: Carbon emissions; Economic globalization; Global supply chain; Intermediate and final trades; Trade imbalance.