Rich countries outsource CO2 emissions to emerging countries – 04/29/2023 – Market

Rich countries have managed to dissociate economic growth from an increase in carbon emissions. Data from recent years show that global powers such as the USA, Germany and the United Kingdom continued to show an evolution in GDP (Gross Domestic Product) without having to throw more CO2 into the atmosphere to do so.

At first glance, the news seems to be a sign of progress in the fight against the climate emergency. After all, these are countries that make up the list of the planet’s main polluters, as a result of the historical relationship between a high volume of emissions and good economic performance.

However, the conquest of the “green GDP” by these powers hides a new carbon dynamic in the world. If it is true that rich countries dissociated productivity and CO2, the same does not occur with developing nations, such as China and India —which may indicate a process of “outsourcing of emissions”.

Worldwide, greenhouse gas emissions continue to rise, following the global GDP curve. That is, although the rich countries have started to grow without increasing carbon, the climate scenario remains very pressured.

The latest report from the IPCC, Intergovernmental Panel on Climate Change, shows that the world is close to failing to keep warming below 1.5°C.

Despite the more sober tone, the scientists warned that the environmental policies already implemented will not be enough to reverse the catastrophic trajectory, requiring quick and immediate actions on all fronts.

The pessimistic forecast comes despite the “green GDP” achieved by dozens of countries over the last few years.

In part, this is due to the fact that many rich nations have reduced the CO2 emitted in their territories by importing—rather than producing—products with a large carbon footprint.

A 2014 IPCC report, revealed by The Guardian newspaper, said that emissions were being shifted from rich countries to emerging economies.

Outsourcing would come in the form of electronic devices, smartphones and clothing manufactured in China, for example, to be consumed in the US and Europe.

According to the study “The carbon gap in climate policy”, about 13% of Chinese emissions in 2015 were generated in the production of goods for other countries. In India, the percentage was 20%.

The geographical displacement of carbon helps to understand why the volume of global CO2 continues to grow despite the fact that some countries have managed to decouple GDP from increased emissions. But outsourcing doesn’t explain everything.

William Wills, director of the Brazil Climate Center, points out that the large economies are also more advanced in the climate agenda, and have had emission reduction measures and carbon markets for some time. Developing countries, such as India and China, have more difficulties in cutting CO2.

He also recalls that some powers have been concerned about the “escape from cabono”, advancing in policies to tax the importation of goods based on the greenhouse gases emitted during production. Europe, for example, is discussing a carbon adjustment mechanism at the border (Cbam).

“If on the one hand this outsourcing happens, on the other hand the European Union and other countries try to avoid this effect [de fuga de carbono]”, it says.

However, penalties like this often spark debates about climate justice. The criticism is that rich countries — which have benefited from a carbon-based economy in the past — now demand environmental measures from nations that are beginning to experience some economic development.

Wills agrees with this perspective, but recalls that the window for action to resolve the climate crisis is closing, and the scenarios drawn are tragic.

“Climate urgency ends up overcoming this historic responsibility, given all the risk that the population —especially the poorest— is running”, he argues.

Clean energy and efficiency also explain ‘Green GDP’

According to anthropologist Jason Hickel, reducing emissions in high-income countries is nothing new and has been happening since the 1990s.

Decoupling the economy from CO2, he says, can be achieved by changing energy sources. Wealthy nations have had more success replacing fossil fuels and coal with clean alternatives, which have gotten cheaper in recent years.

The IPCC report itself highlights that, from 2010 to 2019, there were sustained reductions in costs for solar energy (85%) and wind energy (55%).

Another point has to do with the efficiency of the economy itself, which has become less carbon intensive over the last 50 years. The amount of CO2 needed to produce $1,000 of GDP has dropped worldwide as a result of technological advances.

The problem, in Hickel’s view, is the speed with which the global economy is decarbonizing.

“None of the high-income countries are on track. In fact, countries that have achieved an absolute decoupling of GDP and emissions are currently on track to take more than 200 years to reach zero emissions,” he says.

In his view, there is nothing green about it and to claim otherwise would be greenwashing —sustainable false advertising.

Hickel is one of the main thinkers of the movement called Degrowth (degrowth, in Portuguese), which defends the retraction of the economy to save the planet.

In his evaluation, a much faster mitigation is necessary, given that simple efficiency improvements will not lead the world to the right path.

“High-income countries need to abandon growth as a goal and actively reduce less necessary forms of production in order to reduce energy use directly and therefore allow for faster decarbonization,” he argues.

Ronaldo Seroa da Silva, PhD in Economics from University College London and professor at UERJ, thinks differently.

For him, a technological shock is needed to make the economy even less intensive in greenhouse gases.

“[Nós já] We can produce more with less carbon. But the growth in production is greater than the reduction in carbon intensity”, he says. “So even with the intensity falling, annual emissions rise.”

He recalls that there are promising options, with very beneficial potential for the environment, such as green hydrogen and solutions for capturing carbon from the atmosphere.

“We are not going to achieve a trajectory of 1.5ºC via recession. We have to do it via technology.”

The best way to accelerate these advances, says Silva, is to make carbon emissions expensive — through a tax or, preferably, a regulated market.

“That is what will generate the incentive, because companies will see that it is preferable to invest in these mitigations than to pay the market price on carbon”, he says.