Carbon dioxide emissions embodied in international trade

In Context 

• The growing consumption in rich countries has come at a cost for developing countries such as India.

About 

• The uncertainties in the global economic environment  have all been believed to have created export opportunities for countries such as India.
  • Uncertainties , significantly driven by Russia’s invasion of Ukraine and the resultant sanctions on Russia by the West, along with Sri Lanka’s ongoing struggles to stay afloat amidst a deepening crisis.

How Carbon dioxide emissions embodied in international trade?

• As per the environmental Kuznets curve, there is an inverted U-shape relationship between the income of a country and its environmental degradation. 
• This implies that as income increases, environmental quality begins to deteriorate, but improves after some time.
  •  However, there is no consensus across studies with respect to this possibility.

Emissions-embodied exports: Data Analysis 

• Performance of Developed countries
  • Most developed countries are the net importers of polluted goods produced elsewhere, especially in the developing countries. 
  • The largest net importers of carbon emission-intensive goods are the U.S,Japan and Germany. 
  • The U.S. net carbon imports increased from 262.3 million tonnes in 1995 to 834.1 million tonnes in 2018.
  •  The OECD member countries which are developed are net importers.

• Performance of India 
  • The data available from the Organisation for Economic Co-operation and Development(OECD) indicates that India is one of the leading exporters of carbon emissions-embodied products, and that there is a steady increase in the total carbon emissions embodied in exports.
    • China is the largest exporter of carbon emissions-embodied products, followed by the U.S,Russia and India. 
  • India’s total carbon emission exports increased from 80.3 million tonnes at the time of it joining the World Trade Organisation (WTO) in 1995 to 426.1 million tonnes in 2018.
    • India’s recent export performance has been attributed to petroleum products, electronics and chemicals.

Reasons of relocation of pollution-intensive industries 

•  Due to the stringent environmental measures adopted by developed countries, pollution-intensive industries show a tendency to relocate from developed countries to developing countries with the lowest environmental standards/weak enforcement of environmental standards in order to cut resource and labour costs — a phenomenon researchers term as the ‘pollution haven hypothesis’. 
• Thus, developing countries that are lax in enforcing environmental policies eventually become pollution havens.
  • The 2009 United Nations Climate Change Conference in Copenhagen witnessed a vociferous argument from countries such as India and China that developed countries who are consuming polluted goods produced elsewhere also have an obligation to clean up the mess.

Implications of exports of agricultural and food products 

• India is virtually exporting some of its depleting natural resources such as water through exports. 
  • India is the leading exporter of rice in the world market.
•  India is indirectly exporting water to other countries  given that rice is a water-intensive crop.
• This virtual water trade will have an adverse impact on long-term sustainability and food security of the country although there has been an overall improvement in water-use efficiency. 
  • The agricultural water withdrawal as a percentage of total available renewable water resources has increased from 26.7% in 1993 to 36% in 2022. 

The way forward

• Countries have begun imposing an environmental tax to address a broad spectrum of environmental issues. 
• In order to ensure long-term sustainability, strict environmental measures need to be explored, such as revisiting the possibilities of increasing the environmental tax, even though the short-run implications, especially on the trade front, may not be pleasant. 
• Similarly, water-saving policies that seek to improve the water use efficiency are also the need of the hour, in order to promote sustainable production of rice and also safeguard food security in the country.
• Recent export spike needs to be observed carefully 
  • An increased GDP as a result of expansion in export revenue can be utilised for improving the environmental quality. 

Source:TH