The effect of technology spillover on CO2 emissions embodied in China-Australia trade

CO2 emissions embodied in international trade have drawn wide attention in the academia and national climate negotiations. In this study, we estimate the embodied CO2 emissions in the trade between China and Australia using long time series disaggregated sectoral data based on missions embodied in bilateral trade (EEBT) method, and analyse the major driving forces for these emissions changes based on structural decomposition analysis (SDA) method. The results show that export volume contributed to these embodied CO2 emissions increase, while emission intensity could offset these CO2 emissions increase. We further predict embodied CO2 emission in Sino-Australia trade under different scenarios and the results indicate that technology spillover can significantly reduce embodied CO2 emissions in trade. Electricity, transportation and cement industries have significant potential to reduce carbon emissions. In addition, we evaluate future carbon reduction potential till 2030. The results in this study can inform decision-makers for Australia and China to formulate energy conservation and emission reduction policies.