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Greenhouse gases embodied in international trade : an input-output analysis for Canada : 2002 Tran, Julie


Both climate change and actions to fight it are occurring against rapidly expanding international trade flows, which increasingly lead to the separation of production and consumption patterns. Through the trade of goods in a globally interdependent world, the consumption in each country is linked to greenhouse gases (GHG) emissions in other countries because GHGs are emitted throughout the supply chain involved in producing those goods; a phenomenon referred to as ‘embodied GHG’. In this research, taking a consumption-based approach and using an environmental input-output analysis, I explore the amount of GHGs embodied in Canada’s imports and export for the year 2002 and determine that Canada has a negative balance of embodied emissions in trade (BEET). This implies that the GHGs emitted in connection with the production of exported goods surpass those emitted in connection with the production of imported goods. In light of Canada’s large trade surplus in 2002, my finding support the hypothesis that there may be an inherent conflict between a national GHG reduction target for domestic emissions and the aims of improving trade balances or maintaining trade surpluses. While my negative BEET result holds under different model specifications (i.e., single-country or multi-country model), I also show that it is highly dependent on the exchange rate used to convert the value of Canadian imports from the U.S. into the U.S. currency. Thus, my results demonstrate the weakness of using monetary flows of merchandise trade when trying to estimate physical quantities, in this case, the amount of GHGs embodied in the traded goods. Finally, I also discuss some of the key intersections between climate and trade policies, with a particular focus on climate policies that attempt to link the consumption of goods in a country with the amount of GHGs emitted during their production, whether in that country or elsewhere.

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