Tuesday, April 29, 2008

Outsourcing pollution to China

Not sure how I missed this Wallstreet Journal article that indirectly examines the pollution haven hypothesis. The issues covered in this article are those I have written about a number of times in my academic papers.

My view is that the buyer must take some responsibility for China's pollution especially when these are often Western companies and therefore western shareholders that benefit.

This is an important point and links trade to pollution.

Why China Could Blame Its CO2 on West [Wallstreet Journal]

"As China's emissions rise, everyone is pointing the finger of blame at China," says Andrew Simms, policy director of the New Economics Foundation, a think tank and environmental-advocacy organization based in London. "The real responsibility for rising emissions should lie with the final consumers in Europe, North America and the rest of the world."

The argument appeals to leaders in China, which by some tallies has already passed the U.S. as the world's largest emitter of carbon dioxide. Earlier this year, Chinese Foreign Ministry spokesman Qin Gang reminded reporters from the Western media that "a lot of the things you wear, you use, you eat are produced in China." On the one hand, Western companies are manufacturing more in China, but "on the other hand, you criticize China on the emission-reduction issue," he added. Roughly 23% of China's emissions come from the production of goods that are shipped elsewhere, according to a recent report by the Tyndall Centre for Climate Change Research in Britain.

Some economists dismiss the argument and note that China happily benefits from the arrangement. "China loves being an exporter, so it's ironic they would blame the U.S. for their exports," says Robert Stavins, a professor of business and government at Harvard University. "It's called having your cake and eating it too."

At this point, the blame-the-buyer approach is more a negotiating tactic than a serious proposal for redrafting the global-emissions map. But as new studies and reams of data become available tallying embedded emissions, the research could influence the debate over what kind of emissions cuts various nations should be called on to make.


As international trade has boomed over the past decade, the U.S. has begun importing dramatically more carbon-intensive products from its trading partners, according to the researchers. The study found that so-called embedded emissions in U.S. imports roughly doubled from 1997 to 2004. In 2004, the U.S. imported as much as 1.8 billion tons of CO2 embedded in products, the equivalent of 30% of the nation's carbon output that year. Many of those goods are coming from China.

U.S. officials concede that dirty industries shift around the world to the place of least resistance in response to environmental policy. That is one reason why developed nations like the U.S. and Australia have refused to participate in a climate deal that doesn't include developing nations like China and India.

They argue that forcing developed nations to agree to cuts, when developing nations aren't subject to similar limits, could make their industries less competitive. They say this could undermine any treaty by driving dirty manufacturing overseas to less-regulated areas.

H/T: In the Green


Prasad Rao said...

Unquestionably, dirty industries shift to nations with dirty resources and/lax regulations. The impact is not just on GHG emissions; these industries also pollute the land, water and air with various pollutants and toxic releases beside bringing about deforestation, building of environmentally damaging dams and other unsustainable acts, some of which are in the regulatory and policy arena.

My suggestion, however impractical as it may sound, concerns 'capitalizing' the value of environment and its various services in to the stock market and distributing the same among citizens of the nation. Let's presume the environment is revalued periodically and the same reflected in the stock market. Citizens benefit when the value of these 'envirostocks' appreciate under prudent environmental management. They stand to lose monetarily if the government indulges in exploitation of the environment for short term gains. The monetary stake in the nation's environment is likely to induce citizens to demand, and the government to pursue environmentally sustainable policies, in the process bringing about a partial internalization of the environmental impacts of globalization and ruthless capitalism.

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