Emissions burden shifting in global value chains – winners and losers under multi-regional versus bilateral accounting

ABSTRACT

International trade leads to emissions burden shifting and threatens mitigation targets. Multiregional input–output (MRIO) and bilateral trade input–output (BTIO) models are widely used to analyse emissions embodied in trade and global value chains. Especially, the last one is used in analysing border tax adjustment (BTA) on the carbon content of imports. The model choice is not trivial. The analysis shows BTIO's inability to capture the consumer-principle throughout the production chain and its inadequacy as an option for consumption-based accounting, because it allocates emissions to the first importing country and to the sector of production, instead to the consumer (both country and region). Regarding the BTA assessment, BTIO tax domestic carbon content of direct imports, but not indirect imported carbon content. MRIO does provide incentives for mitigation in third countries. The differences in allocation of emissions and taxes’ burden of both models have different consequences for developed and undeveloped regions.

KEYWORDS:

• Multiregional input–output model
• carbon emissions
• bilateral input–output model
• emissions embodied in trade
• border tax adjustment

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

María-Ángeles Cadarso http://orcid.org/0000-0002-5165-7729

Fabio Monsalve http://orcid.org/0000-0001-6595-2799

Guadalupe Arce http://orcid.org/0000-0002-7357-3091

Additional information

Funding

This work was supported by the Ministry of Economy and Competitiveness of Spain [grant number ECO2012-33341 and ECO2016-78939R] and the Regional Government of Castilla-La Mancha [grant number PPII-2014-006-]. Guadalupe Arce also thanks the Spanish Ministry of Education, Culture and Sports through the National FPU Program [grant number FPU 13/05869].