Emissions embodied in trade. What accounting method to use?

What is it about?

Internationally, reporting of greenhouse gas emissions is currently based on the production-based (PB) accounting method, which measures emissions generated in the place where goods and services are produced. However, this allocation method has been criticised for excluding emissions embodied in trade. Consequently, consumption-based (CB) accounting has been proposed as an alternative, or as a complementary information tool. This approach allocates emissions from goods and services to the country of the final consumer. It therefore includes emissions embedded in imports, plus aviation and shipping emissions, but excludes emissions embodied in exports. The main aim of this chapter is to outline the arguments in favour of and against adoption of CB accounting. In addition, it reviews how CB accounting is used in policy-making processes.

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Why is it important?

Provides an account of this important debate in a plain manner.