For many commentators in the wake of Copenhagen, China became the scapegoat for the failure to secure a meaningful and binding agreement. But one reason for China’s resistance to international climate treaties is that they measure emissions (and therefore required emissions cuts) on a national production basis, not consumption, and so ignore the carbon imbedded in the huge imports of goods from China to the West (especially the US).
On this issue they have a point – a recent estimate is that taking into account the net export of goods from China to be consumed abroad reduces China’s CO2 emissions by almost a third. Another way of looking at this issue is that countries with a trade deficit (like the US and the UK) have much higher emissions that the conventional Kyoto accounting principles suggest.
What should be done? An economist’s prescription might be to argue for lower consumption in the West (partly achieved by the financial crisis) and carbon border taxes. The problem with these is that they would be difficult to set fairly and transparently, just as accurate carbon labelling hundreds of thousands of products is an almost impossible task. Border taxes would also be viewed as protectionist (as well as being very difficult to get through the WTO).
An alternative starting point would be to recognise that the actors with the most detailed knowledge of global supply chains and their energy inputs are transnational companies. These huge corporates are already very active in driving changes through their supply chains, improving quality and reducing costs, and often have detailed information on how parts and materials are produced. These companies also have considerable market power in sourcing countries. They could demand lower carbon energy sources and greater energy efficiency, but also help suppliers achieve these.
There is already some interest within corporates in “greening” the supply chain. What is missing is an organised pressure from consumers to demand greater progress, providing a powerful motivation for faster and deeper corporate action. This should not be hard to mobilise, since there is evidence that consumers in countries like the UK want the brands they buy to have lower carbon footprints. They are likely to be willing to pay more for lower carbon goods, just as they do so for fair trade goods. This willingness is key, for it is right that western consumers rather than producers in China and elsewhere should pay for the decarbonisation of products, bearing the true cost of their consumption and providing the resources to invest in lower carbon energy.
We also know that this approach can work, because it has worked before. Back in the late 1990s a number of international development charities, such as Christian Aid, ran campaigns for better working conditions amongst suppliers, targeting supermarkets. This successful campaign led to the establishment of the Ethical Trading Initiative, bringing companies, charities and unions together to transform conditions along the supply chain. What we need now is a similar campaign, and a Carbon Trading Initiative.