The salience of carbon leakage for climate action planning: Evidence from the next eleven countries

Territorial-based carbon emissions (TBEs) have been studied extensively. However, investigations of consumption-based carbon emissions (CBEs), adjusted for international trade, have been mainly centered on theoretical arguments. This research is an attempt to address the gap by using CBEs in the case of Next Eleven (N-11) countries. Given that the N-11 are tracking to overtake the G-7 by 2050, successful action to mitigate and adapt to climate change will increasingly need to consider the impact of this fast-emerging group of countries. For empirical analysis, this study employs the cross-sectionally augmented autoregressive distributed lag (CS-ARDL) methodology to examine the long- and short-run impact of imports and exports separately, along with economic growth, industry value addition (IVA), and oil price as control variables using data from 1990 to 2017. The empirical findings reveal that imports enhance, while exports reduce CBEs both in the long- and short-run. Whereas economic growth and IVA intensify CBEs, rising oil prices decrease CBEs both in the long and short-run. The main finding of this study provide evidence of carbon leakage and N-11 countries should diversify their energy mix toward renewable energy and adopt policies related to CBEs that recognize the transfer of emissions (carbon leakage) in trade. (C) 2021 Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.

Automated summary

This study investigates consumption-based carbon emissions (CBEs) in Next Eleven (N-11) countries and finds that imports increase while exports decrease CBEs in both the long and short run. Economic growth and industry value addition (IVA) intensify CBEs, while rising oil prices reduce CBEs. The study suggests a need for N-11 countries to diversify their energy mix towards renewable sources and implement policies related to CBEs to address carbon leakage.