Carbon emissions embodied in international trade: The post-China era

The so-called post-China countries (PC-16´s), distinguished by low wages and high economic growth, will replace China as the "world's factory". The aim of this paper is to assess the effect of these changes on global CO₂ emissions pathways. To achieve this, a counterfactual is proposed wherein China's trade with the rest of the world is replaced by the PC-16's trade in a global multiregional input-output context. The emissions savings realized by trade replacement are significant in those scenarios where the current pattern of trade is maintained (-13% on emissions traded and -3.5% on global emissions) and in scenarios where enterprises relocate their production directly or indirectly to the most environmentally efficient countries (ranging from -15.2% to -18.2% on emissions embodied in trade). Nevertheless, the potential savings drop considerably (ranging from -1.5% to -7.1%) if companies and host countries take advantage of cheaper, but more polluting means of production and do not internalize the externalities. Through changes in international trade, there is a possibility of reducing emissions, which have to be included in international, multilateral and bilateral agreements to mitigate climate change if we do not want to lose the opportunities these changes present.