Research Articles International Carbon Trade and Domestic Climate Politics • Kathryn Harrison*

Research Articles International Carbon Trade and Domestic Climate Politics • Kathryn Harrison* Abstract This article theorizes about the implications for domestic climate politics of three distinct roles countries play in the global carbon supply chain: fossil fuel producer, manufacturer of carbon-intensive goods, and final consumer. Because international responsibility is assigned to territorial emissions, countries at either end of the global supply chain effectively evade environmental responsibility by shifting fossil fuel combustion to manufacturing countries. In so doing, they lessen the political challenges of reducing domestic emissions. Although exporters of carbon-intensive goods are reluctant to disadvantage local producers, importers can craft policies that both reduce territorial emissions and create local jobs. Ironically, fossil fuel exporters can emerge as leaders in reducing their own territorial emissions, a finding illustrated by case studies of British Columbia and Norway. The conclusion argues that shifting responsibility for carbon emissions to the point of either final consumption or fossil fuel extraction could facilitate an international climate agreement. Climate leadership has emerged at times from surprising quarters. Since 1991, Norway, a major oil producer and exporter, has had one of the world’s highest carbon taxes. Norway also has committed to achieving carbon neutrality by 2050. In 2008 the Canadian province of British Columbia, which relies on coal exports from local mines, adopted a carbon tax that both the OECD and World Bank have advanced as an international model. The explanation for these seem- ing contradictions lies at the intersection of international trade, domestic politics, and global environmental governance. The United Nations Framework Convention on Climate Change (UNFCCC), via the Intergovernmental Panel on Climate Change (IPCC), assigns responsibility to countries only for the greenhouse gas emissions that occur within their borders.1 Jurisdictions that * I gratefully acknowledge financial support from the Social Sciences and Humanities Research Council of Canada via the Sustainable Prosperity Research Network, superb research assistance from Stefan Pauer, and insightful feedback from Endre Tvinnereim, Brent Sutton, and the jour- nal’s anonymous reviewers. 1. UNFCCC 2006, para.9; IPCC 2006, 1.4. Global Environmental Politics 15:3, August 2015, doi:10.1162/GLEP_a_00310 © 2015 by the Massachusetts Institute of Technology 27 Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/GLEP_a_00310 by guest on 27 September 2021 28 • International Carbon Trade and Domestic Climate Politics export fossil fuels thus can prosper while evading responsibility for the downstream emissions that inevitably will result. While that is true for all fossil fuel exporters, the political implications are most apparent in the case of exporters that do not rely heavily on their own fuels. With relatively low-carbon economies powered by hydro-electricity, both Norway and British Columbia can tax domestic carbon emissions with minimal consequences for local industry, in- cluding their export-oriented fossil fuel producers. Moreover, both governments have been able to embrace domestic mitigation measures because they have confidence in the security of jobs in and tax revenues from the fossil fuel industry. Indeed, in both jurisdictions, policies to reduce territorial emissions have been celebrated with almost no acknowledgment of the much greater global damage being done by their growing fossil fuel exports. Motivated by these cases, this article theorizes about the implications of international trade for domestic climate politics more broadly, analyzing three distinct roles countries play in the global carbon supply chain—fossil fuel exporter, manufacturer of goods for export, and importer of goods. At both ends of the international supply chain, fossil fuel exporters and importers of “embodied carbon” effectively evade environmental responsibility by shifting fossil fuel combustion to manufacturing countries in the middle of the supply chain. While economists and physical scientists have documented these carbon flows, this article is among the first to explore the domestic political implications of these trading patterns. I argue that in evading environmental responsibility for fossil fuel combustion, importers of embodied carbon and exporters of fossil fuels lessen the political challenges of reducing their own territorial emissions. The article focuses most closely on the understudied implications of fossil fuel exports. Countries endowed with abundant fossil fuels often take advantage of those resources by burning them at home, with the result that exports of fossil fuels and embodied carbon go hand in hand. However, that is not always the case. Some fossil fuel exporters have relatively clean manufacturing economies, while relying on imported embodied carbon. Still other countries with carbon- intensive manufacturing rely on imported fossil fuels. In other words, trade in fossil fuels and trade in embodied carbon are distinct activities, which turn out to have different domestic politics. In particular, while exporting embodied carbon deters domestic mitigation, exporting fossil fuels need not do so and indeed may facilitate adoption of policies to abate territorial emissions by pro- viding durable economic benefits. In focusing on territorial emissions, which entail the most concentrated and localized costs of mitigation, the international community has assigned responsibility at the point in the global carbon supply chain that presents the greatest challenge for domestic politics. Although the primary focus of the article is the implications of international carbon trade for domestic politics, the conclusion reflects on whether reassignment of responsibility to either the point of fossil fuel extraction or final consumption could yield more favorable international politics. Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/GLEP_a_00310 by guest on 27 September 2021 Kathryn Harrison • 29 The Global Carbon Supply Chain As Peters and Hertwich observe, “international trade causes a geographic sepa- ration of consumers and the pollution emitted in the production of consumable items. This gives a mechanism for consumers to shift environmental pollution associated with their consumption to distant lands.”2 Analysis of ecological and, more recently, carbon footprints has highlighted the global environmental consequences of consumption.3 While ecological footprint analysis originally fo- cused on the individual consumer, subsequent literature has examined national-level implications.4 Dauvergne coined the term “ecological shadow” to describe how a nation’s imports impose ecological costs in other, often de- veloping, countries.5 Multi-region input–output analysis allows for tracking of raw materials, intermediates, and final goods as they cross borders, thus allow- ing for comparison of different measures of environmental impact. Before reviewing insights from that literature, several definitions are in or- der. Territorial or production emissions are those that countries release within their own borders. Production emissions correspond to national greenhouse gas emissions inventories reported to the United Nations under the Framework Convention on Climate Change. Embodied carbon refers to emissions that occur at any point or location in the production of a good or service. At the national level, consumption emissions refers to all embodied carbon associated with goods and services consumed in a given country. Consumption emissions differ from production emissions to the extent that goods are imported, exported, or pro- duced at home as follows: Ec =Ep + EEI − EEE Ec = Consumption Emissions Ep = Production Emissions EEI = Emissions Embodied in Imports EEE = Emissions Embodied in Exports The balance of emissions embodied in trade (BEET) follows: BEET = EEE − EEI Countries with a positive balance of emissions in trade are net exporters of embodied carbon, while those with a negative BEET are net importers. While there is a rapidly growing body of literature comparing production and consumption emissions,6 scholars have only recently turned their attention 2. Peters and Hertwich 2008. 3. Wackernagel and Rees, 1998. 4. Turner 2014. 5. Dauvergne 1997; Dauvergne 2008. 6. Peters and Hertwich 2008; Pan et al. 2008; Weber and Peters 2009; Davis and Caldeira 2010; Peters et al. 2011, Steinberger et al. 2012; Harris and Symons 2013; Turner 2014. Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/GLEP_a_00310 by guest on 27 September 2021 30 • International Carbon Trade and Domestic Climate Politics to the prior step in the carbon supply chain, trade in fossil fuels themselves.7 Extension of prior terminology can be a source of confusion, however. Although fossil fuels embody carbon, embodied emissions refers to those that have already occurred in the manufacture of a product, rather than prospective emissions, which will occur only when a fossil fuel is burned. Also confusing, Davis, Peters, and Caldeira employ the term “extraction emissions” to refer to emissions that will be released downstream when fossil fuels are burned, rather than to emissions released during extraction operations.8 (The latter contribute to territorial emissions in the producing country and embodied emissions in a country importing fossil fuels.) To avoid confusion, the discussion here

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