International trade is characterized not only by the flow of capital and goods, but also by the
energy and emissions embodied in goods during their production. This paper investigates the evolving role
that Chinese trade is playing in the response to climate change by estimating the scale of emissions embodied
in China’s current trade pattern and demonstrating the magnitude of the difference between the emissions it
produces (some of which are incurred to meet the consumption demands of the rest of the world) and the
emissions embodied in the goods it consumes. Estimating China’s emissions on a consumption rather than
a production basis both lowers its responsibility for carbon-dioxide (CO2) emissions in 2006 from 5,500 to
3,840mtCO2 and reduces the growth rate of emissions from an average of 12.5 per cent p.a. to 8.7 per cent p.a.
between 2001 and 2006. The analysis indicates that a reliable consumption-based accounting methodology
is feasible and could improve our understanding of which actors and states are responsible for emissions.
For example, recent emissions reductions by developed countries may lack credibility if production has
merely been displaced to countries such as China. Moreover, in the current institutional context, production
methodologies encourage leakages through trade that may do more to displace than to reduce emissions.
Both equity and efficiency concerns therefore suggest that emissions embodied in trade should receive special
attention in the distribution of post-Kyoto abatement burdens.