Carbon emissions embodied in trade and urban regional climate policy-making in the Shanghai mega-region

Abstract

CO2 emissions embodied in trade (EET) may play an important role in reducing regional obligations toward carbon emission reduction within the context of a nation’s climate change and greenhouse gas emission policy. Based on a multi-region input-output (MRIO) analysis, this paper uses Shanghai’s 30 industrial sectors as a case to estimate 2007 carbon emissions embodied in domestic and international trade, so as to unravel sectoral and regional sources of emissions embodied in Shanghai’s domestic imports and exports, and to compare consumption-based and production-based emission accounting approaches. The MRIO framework implemented here overcomes many modeling and data limitations encountered in the existing literature, which provides more reliable and more disaggregated estimates in support of climate policy-making. We also discuss a policy option that potentially reduces the incidence of trade on the emissions of regional economies in the study area. One finding from this study is that Shanghai’s carbon emissions embodied in domestic trade with Chinese provinces are 82.60 million tons, which accounts for 50.67% of Shanghai’s overall emissions in 2007. In addition, the embodied emissions of import sources of Shanghai are mainly located in Northern and North Central China, while those of export flows are primarily observed in the coastal provinces of Eastern China. Another important finding is that, owing to the large scale of Shanghai’s EET, the incidence of inter-regional trade is largely curtailed if Shanghai participates in a coalition with neighboring provinces, instead of as an individual region. Therefore, the study suggests that one way to shield domestic trade from the stringent requirements of a national climate policy while preserving the economic benefits of inter-regional trade may be to encourage coalition formation in the Yangtze River Delta to boost cooperation around the Shanghai megacity. Therefore, we advocate a more regional approach to climate change and emissions mitigation policies.