Does international trade reduce global carbon inequality? Evidence from a producer-consumer shared responsibility

Abstract

Addressing global carbon inequality constitutes an important task for both international negotiations on climate-change mitigation and the achievement of sustainable development goals. Soaring international trade might become a vigorous modifier for reducing global carbon inequality through production reallocation and economic boosts in different countries. However, this effect remains largely unexplored, not only because of little awareness of the windfall benefits from international trade but also because of debates on quantifying global carbon inequality from both production- and consumption-based perspectives. To avoid incomplete implications from a single perspective, this study first adapted a producer-consumer shared responsibility to evaluate global carbon inequality using the technology-adjusted consumption-based accounting method for 189 countries from 2006 to 2016. A dynamic panel data model was developed to examine the different channels through which international trade affects global carbon inequality in developed and developing countries. The results demonstrate that even with increasing carbon emissions, less global carbon inequality was witnessed from 2006 to 2016. International trade plays an important role in reducing global carbon inequality, mostly by stimulating the economy and increasing household income in developing countries. However, production reallocation via international trade fails in reducing the emission responsibilities of developed countries, rendering this futile in alleviating global carbon inequality. Carbon leakage that transfers carbon-intensive production across borders can lead to this unintended result, and more stringent cross-border regulations such as the carbon border adjustment mechanism can be effective. This study not only highlights the pivotal role of international trade in reducing global carbon inequality but also the future direction of international cooperation on climate change mitigation in a globalized world.

Keywords: Carbon inequality; Carbon leakage; International trade; Producer-consumer shared responsibility; Technology-adjusted consumption-based accounting.