Carbon Outsourcing: The Carbon Loophole
In climate talks and global goals of emissions reduction, we often hear politicians congratulating themselves and their country for being climate leaders as their emissions fall. But behind this hot air lies a lesser-known phenomenon revealing the reality of many so-called emission cuts: carbon outsourcing.
Over the past decade, many of the economically wealthier countries have made significant steps in reducing their domestic carbon emissions. But carbon outsourcing is the “carbon loophole” underpinning these so-called successess…
How does Carbon Outsourcing work?
Under the Paris Climate Agreement, countries are only responsible for emissions produced within their own borders. As a result, many countries have increasingly relocated their energy-intensive industries overseas as well as increasingly importing goods manufactured abroad; this means that the emissions created as a result of these industries and the manufacturing technically occur outside their country borders. Whilst the wealthy country benefits from the products generated and resources exploited abroad, the resultant carbon is, as far as they’re concerned, “out of sight, out of mind”. This is how countries are essentially “outsourcing” their carbon emissions.
A 2018 report on the global carbon trade calls this a “carbon loophole” and estimates that 25% of the world’s total emissions are outsourced (KGM & Associates and ClimateWorks):
“It’s a huge problem. If a country is meeting its climate goals by outsourcing emissions elsewhere, then we’re not making as much progress as we thought.”
What does carbon outsourcing look like?
In 2020, greenhouse gas emissions were reportedly 51% below 1990 levels in the UK. This marks a promising halfway point to meeting their ‘net zero’ target by 2050. Some of this can be attributed to the impacts of Covid-19, but much of the UK’s emission decline is attributed to a changing energy landscape - like phasing out coal and ramping up renewable energy.
But while domestic emissions have been steadily falling, emissions created abroad have had an entirely different trajectory. One study shows that emissions associated with imports to the UK, including international travel, have risen from about 316 million tonnes of carbon in 1990 to 358 million tonnes in 2017. This would make up as much as half of the UK’s true carbon footprint.
The US has also claimed progress when it comes to reducing domestic carbon emissions. According to the BP Statistical Review of World Energy, annual carbon emissions in the U.S. declined by 758 million metric tons between 2005 and 2017. This was the largest overall decline of any country in the world, and many wealthy countries saw similar progress as they moved their energy-intensive industries to countries like China and India.
So, it is unsurprising that during that period, China’s carbon emissions rose by 3 billion metric tons, a 50% increase. And India’s rose by 1 billion metric tons, a whopping 88% increase.
The allure of this carbon loophole means that a growing number of countries are using this practice of “passing the buck”. China, for example, has now begun outsourcing its own carbon-heavy activities to countries such as Cambodia, India and Vietnam.
Countries such as India continue to bear the brunt of carbon outsourcing. In 2015, around 20% of India’s emissions were linked to the manufacturing of goods for other countries.
Why is carbon outsourcing so dangerous?
On the surface, carbon outsourcing appears to be more of a geopolitical issue: with countries passing along the blame to one another, shouldn’t we simply focus on the issue of global emissions and overlook the geopolitical game of “pass the carbon”? Carbon outsourcing, however, is not just deceptive - it has damaging implications…
For one thing, these energy-intensive activities are being moved to countries with less efficient factories and lower environmental standards. Many of them have not transitioned to cleaner energy alternatives. This means that the products imported have a higher carbon footprint than they would if they were made domestically.
Another study led by Dr. Hasanbeigi at Lawrence Berkeley National Laboratory found that compared to American and German manufacturers, China’s steel industry emits, on average, around 23% more carbon per ton of steel produced. This is because China’s power grid relies more heavily on coal.
Carbon outsourcing will only increase as climate policies in economically wealthy countries grow more strict, because companies will simply offshore activities in order to stay compliant.
Most importantly, however, the pollution that is being outsourced to these countries is also detrimental to their peoples health and wellbeing. In 2015, around 20% of India’s emissions were linked to the manufacturing of goods for other countries, primarily the US. Pollution in India is severe. Many of its cities rank among the world’s most polluted. Most pressingly, pollution-related deaths are currently on the rise, increasing from 1.24 million in 2017 to 1.67 million in 2019.
Countries such as India continue to bear the brunt of carbon outsourcing, and as long as this carbon loophole goes unchecked, economically poorer countries will be forced to take on more and more pollution.
This will only increase as climate policies in economically wealthy countries grow more strict, because companies will simply offshore activities in order to stay compliant.
What is the solution?
It stands to reason that these wealthy countries should be held accountable for the pollution produced overseas to make the goods they enjoy. Unfortunately, this is easier said than done as a country’s “consumption emissions” are far more difficult to measure than their domestic ones.
One possible solution for deterring countries from carbon outsourcing is a global carbon tax, although this isn’t likely to happen anytime soon. Some countries have considered a domestic carbon tax on imported items, however this involves getting a precise measurement of “embodied emissions” (the amount of emissions from all the processes required to deliver a product or service). While it is fairly straightforward to tax something like petroleum, it is far more difficult to measure the carbon embedded in a computer or a car.
However, a growing emphasis on supply chain transparency has fueled progress in this area in recent years. In 2017, California enacted a “Buy Clean” law which aims to tackle embodied emissions. This came after a controversy around the state buying steel from a high polluting mill in China as opposed to cleaner, local facilities to refurbish the San Francisco Bay Bridge. Climate policies like this could help influence larger steps in the future.
As with most climate-related issues, there is no silver bullet. At the heart of this issue is a system rooted in colonialism and our insatiable hunger for things. Therefore, the solution is more likely a combination of structural changes: a circular economy, a more holistic approach to environmental footprinting and fair trade practices.
Carbon outsourcing is not a piece that can simply be lifted out without altering everything around it, so change will take time. Unfortunately, that’s the one thing we don’t have.
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