1. Brantley Liddle Energy Studies Institute, NUS
The Importance of Consumption-Based Accounting in a Potential Trade-Carbon Nexus Literature
Brantley Liddle
Energy Studies Institute, NUS

2. Motivation
Long been concern that wealthy countries lower emissions via trade
Recent consumption-based carbon emissions database by Peters et al.
Economics trade-emissions papers use conventional, territory-based data
Only two papers compare territory-based to consumption-based regressions
Knight & Schor (2014)
Lamb et al. (2014)

3. Motivation: Exponential Growth & “Nexus/Cointegration”

4. Outline Descriptive/graphical analysis Regression analysis
Peters et al. consumption-based emissions data: 117 countries,
CDIAC & UNFCCC territory-based emissions data
Ratio consumption-based emissions: trade-based emissions
Net exports of emissions
Regression analysis
Dependent variables: consumption-based emissions vs. territory-based emissions
Independent variables: GDP per capita, trade shares, energy structure, energy prices

5. Ratio of Consumption-based to Territory-based Emissions
28 (out of 117) countries had mean ratio (over ) of less than one
12 countries fuel exports at least 75% of total exports
Average country mean ratio 1.26
Mean ratio for each year ranged
Most countries’ max & min yearly ratio was within 20-30% of their mean

6. Ratio of Consumption-based to Territory-based Emissions vs Average GDP per capita

7. Ratio of Consumption-based to Territory-based Emissions vs Average GDP per capita

8. Ratio of Consumption-based to Territory-based Emissions vs Average Imports to Exports Ratio

9. Ratio of Consumption-based to Territory-based Emissions vs Average Imports to Exports Ratio

10. Share of Net Global Carbon Emissions Flows

11. Share of Net Global Carbon Emissions Flows

12. Additional Variables
World Bank Development Indicators; 102 Countries,
Real GDP per capita
Fossil fuel energy consumption as share of total energy consumption
Industry value added, trade, exports of goods and services, imports of goods and services, all as % of GDP
International Energy Agency; 29 & 33 OECD countries
Real index of energy prices for industry & households
Real index of oil products prices for industry & households
IEA & Asia Development Bank; 48 OECD & Non-OECD countries
Real index of gasoline prices

13. Pesaran CD Test & Absolute Value Mean Correlation Coefficient
LN Consumption-based CO2 p.c.
0.42**
LN Territory-based CO2 p.c.
0.51**
LN GDP pc
0.82**
LN Fossil fuel share
0.52*
LN Industry share
0.45**
LN Trade share
0.48**
LN Exports share
0.46**
LN Imports share
LN Total energy price index
0.86**
LN Oil price index
0.79**

14. Methods Common correlated effects mean group estimator (CMG)
Heterogeneous
Robust to
Nonstationarity, cointegration, breaks, serial correlation
Addresses cross-sectional correlation
Adds cross-sectional averages of dependent & independent variables

15. Trade & Carbon Emissions: Expectations
Fossil fuels share & prices more important for Territory-based emissions
Exports, imports & trade more important for Consumption-based emissions
GDP per capita & industry share not clear

16. Trade & Carbon Emissions
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.57***
[ ]
0.66***
[ ]
Trade share
0.01
[ ]
-0.17***
[ ]
Industry share
0.03
[ ]
0.06
[ ]
Fossil fuels share
1.25***
[ ]
0.76***
[ ]
Obs
2261
2258
x-sects
100
CD (p)
2.8 (0.01)
4.3 (0.00)

17. Trade & Carbon Emissions
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.51***
[ ]
0.53***
[ ]
Exports share
0.03
[ ]
-0.32***
[ ]
Imports share
-0.03
[ ]
0.20***
[ ]
Fossil fuels share
1.35***
[ ]
0.76***
[ ]
Obs
2397
2394
x-sects
102
CD (p)
2.2 (0.03)
4.6 (0.00)

18. Trade & Carbon Emissions: OECD & Non-OECD Panels
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.42***
[ ]
0.57***
[ ]
[ ]
0.64***
[ ]
Fossil fuels share
1.28***
[ ]
0.52**
[ ]
1.21***
[ ]
0.70***
[ ]
Exports share
0.01
[ ]
-0.24***
[ ]
0.02
[ ]
-0.33***
[ ]
Imports share
-0.02
[ ]
0.14*
[ ]
-0.04
[ ]
0.22***
[ ]
Obs
781
1616
1613
x-sects 33 69
CD (p)
0.4 (0.66)
2.0 (0.04)
0.3 (0.74)
0.5 (0.60)

19. Trade & Carbon Emissions: Energy Prices
Energy Price Index
Oil Price Index
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.44****
[ ]
0.84****
[ ]
0.37****
[ ]
0.50****
[ ]
Fossil fuels share
1.35****
[ ]
0.68****
[ ]
1.39****
[ ]
0.54***
[ ]
Exports share
0.01
[ ]
-0.30****
[ ]
[ ]
-0.29***
[ ]
Imports share
-0.004
[ ]
0.19***
[ ]
0.02
[ ]
0.16
[ ]
Price
-0.03
[ ]
0.08
[ ]
-0.09*
[ ]
-0.06
[ ]
Obs
695
770
x-sects 29 33
CD (p)
-1.7 (0.10)
2.8 (0.00)
0.6 (0.54)
1.6 (0.12)

20. Trade & Carbon Emissions: Energy Prices
Energy Price Index
Oil Price Index
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.44****
[ ]
0.84****
[ ]
0.37****
[ ]
0.50****
[ ]
Fossil fuels share
1.35****
[ ]
0.68****
[ ]
1.39****
[ ]
0.54***
[ ]
Exports share
0.01
[ ]
-0.30****
[ ]
[ ]
-0.29***
[ ]
Imports share
-0.004
[ ]
0.19***
[ ]
0.02
[ ]
0.16
[ ]
Price
-0.03
[ ]
0.08
[ ]
-0.09*
[ ]
-0.06
[ ]
Obs
695
770
x-sects 29 33
CD (p)
-1.7 (0.10)
2.8 (0.00)
0.6 (0.54)
1.6 (0.12)

21. Trade & Carbon Emissions: Gasoline Price
OECD & Non-OECD
OECD
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.48****
[ ]
0.59****
[ ]
0.41****
[ ]
0.44****
[ ]
Fossil fuels share
1.29****
[ ]
0.82****
[ ]
1.37****
[ ]
0.68***
[ ]
Exports share
0.03
[ ]
-0.26****
[ ]
[ ]
[ ]
Imports share
-0.03
[ ]
0.18***
[ ]
[ ]
0.21***
[ ]
Price
-0.07**
[ ]
-0.08
[ ]
-0.10**
[ ]
[ ]
Obs
1076
769
x-sects 48 33
CD (p)
3.0(0.00)
3.5(0.00)
1.3(0.18)
2.0(0.04)

22. Trade & Carbon Emissions: Gasoline Price
OECD & Non-OECD
OECD
Dependent variable
Territory-based CO2 p.c.
Consumption-based CO2 p.c.
GDP p.c.
0.48****
[ ]
0.59****
[ ]
0.41****
[ ]
0.44****
[ ]
Fossil fuels share
1.29****
[ ]
0.82****
[ ]
1.37****
[ ]
0.68***
[ ]
Exports share
0.03
[ ]
-0.26****
[ ]
[ ]
[ ]
Imports share
-0.03
[ ]
0.18***
[ ]
[ ]
0.21***
[ ]
Price
-0.07**
[ ]
-0.08
[ ]
-0.10**
[ ]
[ ]
Obs
1076
769
x-sects 48 33
CD (p)
3.0(0.00)
3.5(0.00)
1.3(0.18)
2.0(0.04)

23. Conclusions Most countries net importers of carbon emissions
Low- & high-income countries have largest ratios, most middle-income countries have ratio > 1
China & India particularly important in global flow of emissions
Function of size & carbon intensity; rather than energy intensity of exports
Trade important for consumption-based emissions, but not territory- based
Exports & imports impact emissions in opposite direction
Domestic factors like carbon intensity of energy & energy prices matter for territory-based emissions

24. USAEE Working Paper 2017

25. GDP Nonlinearities: Territory-based Emissions

26. GDP Nonlinearities: Consumption-based Emissions