The Impact of China-EU Trade on Climate Change

International Trade has strong impacts on green house gas (GHG) emission and climate change. the trade between China and the European Union is critical to the global GHG reduction. The EU is committed to reduce its CO2 emissions under the Kyoto Protocol. However, if the EU reaches its emissions targets by importing CO2-intensive products from China or other developing countries, the goals will be pointless. The paper analyzes CO2 emissions embodied in China-EU trade during 1995-2006. The paper shows CO2 emissions embodied in China-EU trade were very imbalanced. The CO2 embodied in China's exports to the EU were 95.04Mt in 1995 and 532.35Mt in 2006. But the emissions in EU's exports to China were only 5.78 Mt in 1995 and 26.05Mt in 2006. The paper concludes that the present trend is unsustainable and leads to ever increasing trade distortions with environmentally counter-productive incentives. Policy responses are needed, first and foremost a continuous carbon footprint accounting system between the EU and China.