the carbon content of austrian trade flows in the european and international trade context

The Carbon Content of Austrian Trade Flows in the European and International Trade Context

Birgit Bednar-Friedl, Pablo Munoz Jaramillo, Thomas Schinko, Karl W. Steininger

Wegener Center for Climate and Global Change and Department of Economics, University of Graz, Austria

FIW, Vienna, April 8th, 2010

The Carbon Content of Austrian Trade

Outline

• Accounting principles in GHG emissions

• Recent and current carbon content of Austrian trade (MRIO)◦ Mulit-regional Input Output Analysis◦ Results for 1997 and 2004

• Future development of carbon content in trade (CGE)◦ Multi-regional Computable General Equilibrium model◦ Climate policy scenarios◦ Results

• The economic and carbon effects for Austria• The economic and carbon effects on a global scale

• Conclusions


Recent and current carbon content of Austrian trade

Objectives

a) Estimate consumption based CO2 emissions for Austria for 1997 and 2004

b) Estimate corresponding carbon balances for exports and imports

c) Provide insight into carbon leakage

- countries comprising Annex I (developed countries)

- non-Annex I (developing and emerging economies)


Multi-Regional Input-Ouput Trade Models

Types of models (i.e. sophistication)

- Autonomous tradeassumes imports produced with same technology as used in importing country

- Unidirectional tradetraces commodities back to producing regionbut only exporter country´s emissions considered (no emissions embodied in goods imported from third regions considered)

- Multidirectional tradeconsiders full feedback loop

6

Final Demand (F)

Region\ Region

Aust

ria

Ger

man

y

Chin

a

Russ

ia

Ital

y

R.o

.W

Aust

ria

R.O

.W.

Tot

alO

utp

uts

code (AT) (DE) (CH) (RU) (IT) (W) (AT) (W) (XX)

Austria (AT) Zat,at Yat,at XAT

Germany (DE)

China (CH)

Russia (RU)

Italy (IT)

Rest of the World (W)

Value-Added (VA)

Total Output (XX) XAT

Intermediate Demand (A)

Methodology: Multi-Regional Input-Ouput Analysis (MRIO)

7

Final Demand (F)

Region\ Region

Aust

ria

Ger

man

y

Chin

a

Russ

ia

Ital

y

R.o

.W

Aust

ria

R.O

.W.

Tot

alO

utp

uts



Germany (DE) Zde,de XDE

China (CH) Zch,ch XCH

Russia (RU) Zru,ru XRU

Italy (IT) Zit,it XIT

Rest of the World (W) Zw,w Yw,w XW

Value-Added (VA)

Total Output (XX) XAT XDE XCH XRU XIT XW



8

Final Demand (F)

Region\ Region

Aust

ria

Ger

man

y

Chin

a

Russ

ia

Ital

y

R.o

.W

Aust

ria

R.O

.W.

Tot

alO

utp

uts



Germany (DE) Zde,at Zde,de Yde,at XDE





Value-Added (VA)




9

Final Demand (F)

Region\ Region

Aust

ria

Ger

man

y

Chin

a

Russ

ia

Ital

y

R.o

.W

Aust

ria

R.O

.W.

Tot

alO

utp

uts


Austria (AT) Zat,at Zat,de Yat,at XAT

Germany (DE) Zde,at Zde,de Yde,at XDE





Value-Added (VA)




10

Final Demand (F)

Region\ Region

Aust

ria

Ger

man

y

Chin

a

Russ

ia

Ital

y

R.o

.W

Aust

ria

R.O

.W.

Tot

alO

utp

uts


Austria (AT) Zat,at Zat,de Zat,ch Zat,ru Zat,it Zat,w Yat,at Yat,w XAT

Germany (DE) Zde,at Zde,de Zde,ch Zde,ru Zde,it Zde,w Yde,at Yde,w XDE

China (CH) Zch,at Zch,de Zch,ch Zch,ru Zch,it Zch,w Ych,at Ych,w XCH

Russia (RU) Zru,at Zru,de Zru,ch Zru,ru Zru,it Zru,w Yru,at Yru,w XRU

Italy (IT) Zit,at Zit,de Zit,ch Zit,ru Zit,it Zit,w Yit,at Yit,w XIT

Rest of the World (W) Zw,at Zw,de Zw,ch Zw,ru Zw,it Zw,w Yw,at Yw,w XW

Value-Added (VA) VAT VDE VCH VRU VIT VW





Data

Data base: Global Trade Analysis Project (GTAP)

GTAP v7 (relates to 2004): 113 regions

GTAP v5 (relates to 1997): 66 regions

57 industries per region

C02 emissions: IEA energy statistics (fuel combustion)

process emissions (UNFCCC) added in this project


Categories and Indicators \Year 1997 2004

Domestic Consumption 44,314 47,780

Consumption in products domestically produced 27,695 29,153

Household (direct consumption) 16,619 18,627

Exports 22,943 31,800

Exports Domestically produced 20,483 27,558

Exports of International Transport 2,460 4,242

Imports (for Austrian Consumption) 44,366 61,988

Imports coming from Annex I countries 34,343 41,408

Imports coming from Non-Annex I countries 10,023 20,581

Imports of International Transport Not available Not available

Indicators

Net Emission Balance (excluding Int. Transport) - 23,884 - 34,430

Consumption-Based Principle (CBP) 88,680 109,768

Production-Based Principle (PBP) 67,257 79,580

Ratio CBP/PBP 1.32 1.38

CO2 Emissions per capita based on PBP (in tons) 8.44 9.74

CO2 Emissions per capita based on CBP (in tons) 11.13 13.42

In thousands of tons of CO2.

Results


How do other countries behave concerning carbon relocation?

38%

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-20%

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20%

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60%

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99%

69%

42%39%

38%

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0%

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99%

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39%38%36%34%

26%22%21%

20%19%

18%

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-40%

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100%

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99%

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39%38%36%34%

26%22%21%

20%19%

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54%

25%

10%

-10%

-11%

-17%

-21%

-23%

-40%

-20%

0%

20%

40%

60%

80%

100%

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99%

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26%22%21%

20%19%

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54%

25%

10%

-10%

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-17%

-21%

-23% -7%

-8%

-8%

-10%

-22%-22%

-23%

-40%

-20%

0%

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9.7

6.7 5.9

12.0

3.9 4.3

13.5 13.4

10.0 9.2

3.0 4.3

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Austria Switzerland Sweden Russia China World

CO2 Emissions per capita based on PBP (in tons)

CO2 Emissions per capita based on CBP (in tons)


The use of different accounting principles…..

…..is of considerable importance when assigning carbon responsibilities:

In 2004 consumption based indicator 38% larger than the production based one

CO2 emissions embodied in imports: double as much as exports

One third of the emissions embodied in Austrian imports originated in non-Annex I countries in 2004

Consumption based accounting suggests that about 3.5 tons of CO2 per

capita need to be added in comparison with production based indicators.


Simulation of climate policy and incorporated carbon trade implications

• Use of Production Based Principle only◦ Effectiveness of climate policy overestimated? ◦ No representation of carbon leakage

• Assess the carbon and economic impact of post-2012 climate policy scenarios for Austria and on a global scale◦ Output, Consumption, Trade flows, Carbon emissions◦ Environmental effectiveness of climate policies (carbon leakage)


The model & data

• Multi-sectoral, multi-regional, Computable General

Equilibrium (CGE) model ◦ Austria/ main trading partners/ world regions (19 regions in total)

◦ 11 sectors: differentiated by energy intensity and whether covered

by EU-ETS

◦ GTAP 7 database 113 countries; 57 commodities; base year 2004

◦ Carbon emissions: unidirectional trade carbon accounting

• Scenario for 2020 (reference)◦ Capital stock, labor, autonomous energy efficiency increase,

multifactor productivity growth

◦ Considering current economic downturn


The Model – regional (dis)aggregation

• 19 regions based on◦ Austria’s main trading partners◦ Importance to climate policy debate


The Model – Sectoral (dis)aggregation


Definition of policy scenarios


Results – Austrian Output & Trade

0%

5%

10%

15%

20%

25%

30%

35%

BAU ETS_EU NETS_EU PK_H IPCC_H

_Output ETS

_Import ETS

_Export ETS

0%

5%

10%

15%

20%

25%

30%

35%

40%

BAU ETS_EU NETS_EU PK_H IPCC_H

_Output NETS

_Import NETS

_Export NETS

Output and Trade effects for Austria relative to 2004 (in %)

ETS sectors

Non-ETS sectors


Results – Austrian CO2 emissions

EU unilateral scenarios

Internationally coordinated scenarios for

Annex I

Production based (PBP) vs. Consumption based (CBP) CO2 emissions 2020 (Mt CO2)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

2004 BAU ETS_EU NETS_EU PK_L PK_H IPCC_L IPCC_H

PBP

CBP

9% 9% 9% 15% 21% 24% 20% 24%


Results – on a global scale

• CO2 emissions should globally decrease from the 2004 level (2 degree objective)

• In all scenarios but IPCC_H: by 2020: CO2 emission increases in unregulated regions > CO2 emission reduction efforts

in Annex I regions

Change in CO2 emissions (in Mt CO2) per region and per scenario by 2020 relative to 2004

Carbon Leakage Rate

Scenario for 2020

ETS_EU NETS_EU PK_L PK_H IPCC_L IPCC_H

Leakage Rate

58% 54% 28% 27% 22% 21%


Leakage Rate = -

∆ CO2 non policy regions (relative

BAU)

∆ CO2 policy regions (relative BAU)


Conclusions

• Past: Multidirectional model of Austrian trade: CO2 emissions under CBP

are 38% larger than under PBP (2004), a ratio increasing since 1997

• Future: Relatively strong effects of climate policy on energy intensive industries

• Overestimation of climate policy effectiveness by PBP

• Gap between Austria’s CO2 emissions according to PBP and CBP to

increase for strict and not-comprehensive scenarios

• On a global scale, CO2 emission reductions due to most climate policies

as discussed pre-Copenhagen are more than counterbalanced by emission increases in non-abating regions

• Carbon Leakage decreases as climate policies become more comprehensive

• For a future post-2012 climate policy agreement the inclusion of ALL world regions – though respecting the principle of common but differentiated responsibilities – is crucial


Further information…

Full report available at:

www.fiw.ac.at > research studies 2009/2010

Karl Steininger [email protected]

Thomas [email protected]

Wegener Center for Climate and Global Change

University of Graz Leechgasse 25

A-8010 Graz, Austria

http://www.fiw.ac.at/

the carbon content of austrian trade flows in the european and international trade context

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