National accounting systems as a foundation for embedded emissions accounting in trade-related climate policies

As governments around the world make more ambitious net-zero commitments, they are paying increasing attention to the greenhouse emissions embedded in traded products. Trade-related climate policy instruments - such as border carbon adjustments, linked emissions trading schemes, or certification schemes are being debated or developed in numerous jurisdictions. These instruments will rely heavily on robust and consistent calculation of embedded emissions, both for efficacy and for compliance with WTO rules. Public emissions accounting frameworks - developed for National Accounts - possess attributes of relative simplicity and modularity, which make them worthy of consideration as a starting point for development of public embedded emissions accounting to support trade-related climate policy. Using the case study of potential ammonia supply chains we assess existing methodologies of four Asia-Pacific countries against the criteria of completeness, accuracy and compliance with trade rules. We find considerable variance in practices between countries, which could be an obstacle to emergence of effective trade-related climate policy in the region. Critical areas for consideration include harmonising global warming potential (GWP) factors, and ensuring the existence of methodologies capable of estimating batch-level embedded emissions. These issues notwithstanding, public emissions accounting frameworks appear to have potential as a starting point for embedded emissions accounting to underpin trade-related climate policy.

Automated summary

As governments commit to ambitious net-zero goals, they are increasingly focusing on greenhouse gas emissions embedded in traded products. Several trade-related climate policy instruments are being debated or developed, relying on robust calculation of embedded emissions and compliance with WTO rules. Public emissions accounting frameworks, developed for National Accounts, provide a simple and modular starting point for developing embedded emissions accounting that supports trade-related climate policy.