The Carbon Content of Austrian Trade Flows in the European and International Trade Context

1. The Carbon Content of Austrian Trade Flows in the European and International Trade Context Birgit Bednar-Friedl, Pablo Munoz Jaramillo, Thomas Schinko, Karl W. Steininger Wegener Center for Climate and Global Change and Department of Economics, University of Graz, Austria FIW, Vienna, April 8th, 2010

2. Outline • Accounting principles in GHG emissions • Recent and current carbon content of Austrian trade (MRIO) • Mulit-regional Input Output Analysis • Results for 1997 and 2004 • Future development of carbon content in trade (CGE) • Multi-regional Computable General Equilibrium model • Climate policy scenarios • Results • The economic and carbon effects for Austria • The economic and carbon effects on a global scale • Conclusions The Carbon Content of Austrian Trade

3. Recent and current carbon content of Austrian trade Objectives • Estimate consumption based CO2 emissions for Austria for 1997 and 2004 • Estimate corresponding carbon balances for exports and imports • Provide insight into carbon leakage - countries comprising Annex I (developed countries) - non-Annex I (developing and emerging economies) The Carbon Content of Austrian Trade

4. Multi-Regional Input-Ouput Trade Models • Types of models (i.e. sophistication) • Autonomous trade • assumes imports produced with same technology as used in importing country • Unidirectional trade • traces commodities back to producing region • but only exporter country´s emissions considered (no emissions embodied • in goods imported from third regions considered) • Multidirectional trade • considers full feedback loop The Carbon Content of Austrian Trade

5. Methodology: Multi-Regional Input-Ouput Analysis (MRIO) 5

6. Methodology: Multi-Regional Input-Ouput Analysis (MRIO) 6

7. Methodology: Multi-Regional Input-Ouput Analysis (MRIO) 7

8. Methodology: Multi-Regional Input-Ouput Analysis (MRIO) 8

9. Methodology: Multi-Regional Input-Ouput Analysis (MRIO) 9

10. Data • Data base: Global Trade Analysis Project (GTAP) • GTAP v7 (relates to 2004): 113 regions • GTAP v5 (relates to 1997): 66 regions • 57 industries per region • C02 emissions: IEA energy statistics (fuel combustion) • process emissions (UNFCCC) added in this project The Carbon Content of Austrian Trade

11. Results In thousands of tons of CO2. The Carbon Content of Austrian Trade

12. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

13. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

14. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

15. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

16. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

17. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

18. How do other countries behave concerning carbon relocation? The Carbon Content of Austrian Trade

19. The use of different accounting principles….. • …..is of considerable importance when assigning carbon responsibilities: • In 2004 consumption based indicator 38% larger than the production based one • CO2 emissions embodied in imports: double as much as exports • One third of the emissions embodied in Austrian imports originated in non-Annex I countries in 2004 • Consumption based accounting suggests that about 3.5 tons of CO2 per capita need to be added in comparison with production based indicators. The Carbon Content of Austrian Trade

20. Simulation of climate policy and incorporated carbon trade implications • Use of Production Based Principle only • Effectiveness of climate policy overestimated? • No representation of carbon leakage • Assess the carbon and economic impact of post-2012 climate policy scenarios for Austria and on a global scale • Output, Consumption, Trade flows, Carbon emissions • Environmental effectiveness of climate policies (carbon leakage) The Carbon Content of Austrian Trade

21. The model & data • Multi-sectoral, multi-regional, Computable General Equilibrium (CGE) model • Austria/ main trading partners/ world regions (19 regions in total) • 11 sectors: differentiated by energy intensity and whether covered by EU-ETS • GTAP 7 database 113 countries; 57 commodities; base year 2004 • Carbon emissions: unidirectional trade carbon accounting • Scenario for 2020 (reference) • Capital stock, labor, autonomous energy efficiency increase, multifactor productivity growth • Considering current economic downturn The Carbon Content of Austrian Trade

22. The Model – regional (dis)aggregation • 19 regions based on • Austria’s main trading partners • Importance to climate policy debate The Carbon Content of Austrian Trade

23. The Model – Sectoral (dis)aggregation The Carbon Content of Austrian Trade

24. Definition of policy scenarios The Carbon Content of Austrian Trade

25. Definition of policy scenarios The Carbon Content of Austrian Trade

26. Definition of policy scenarios The Carbon Content of Austrian Trade

27. Definition of policy scenarios The Carbon Content of Austrian Trade

28. Results – Austrian Output & Trade Output and Trade effects for Austria relative to 2004 (in %) ETS sectors Non-ETS sectors The Carbon Content of Austrian Trade

29. Results – Austrian CO2 emissions Production based (PBP) vs. Consumption based (CBP) CO2 emissions 2020 (Mt CO2) Internationally coordinated scenarios for Annex I EU unilateral scenarios The Carbon Content of Austrian Trade

30. Results – on a global scale • CO2 emissions should globally decrease from the 2004 level (2 degree objective) • In all scenarios but IPCC_H: by 2020: CO2 emission increases in unregulated regions > CO2 emission reduction efforts in Annex I regions Change in CO2 emissions (in Mt CO2) per region and per scenario by 2020 relative to 2004 The Carbon Content of Austrian Trade

31. Carbon Leakage Rate ∆ CO2 non policy regions (relative BAU) ∆ CO2 policy regions (relative BAU) Leakage Rate = - The Carbon Content of Austrian Trade

32. Conclusions • Past: Multidirectional model of Austrian trade: CO2 emissions under CBP are 38% larger than under PBP (2004), a ratio increasing since 1997 • Future: Relatively strong effects of climate policy on energy intensive industries • Overestimation of climate policy effectiveness by PBP • Gap between Austria’s CO2 emissions according to PBP and CBP to increase for strict and not-comprehensive scenarios • On a global scale, CO2 emission reductions due to most climate policies as discussed pre-Copenhagen are more than counterbalanced by emission increases in non-abating regions • Carbon Leakage decreases as climate policies become more comprehensive • For a future post-2012 climate policy agreement the inclusion of ALL world regions – though respecting the principle of common but differentiated responsibilities – is crucial The Carbon Content of Austrian Trade

33. Further information… Full report available at: www.fiw.ac.at > research studies 2009/2010 Karl Steininger karl.steininger@uni-graz.at Thomas Schinko thomas.schinko@edu.uni-graz.at Wegener Center for Climate and Global Change University of Graz Leechgasse 25 A-8010 Graz, Austria The Carbon Content of Austrian Trade