CO2 Trade Deficit

[dr_tectonic]

Interesting economics fact from today's Coffee Talk:

The U.S. trade deficit has gone from about -150 G$ in 1998 to about -525 G$ today, which is, like, a LOT...

...unless you include the environmental costs of the trade, in which case the U.S. basically is able to avoid the implicit costs of CO2 emissions by exporting a significant chunk of them to China. That decreases the value of the U.S.-China trade deficit, and depending on how you price the CO2 emissions, can even wipe it out completely.

(And lest you think I know something about economics, the only reason this makes any sense to me is because the talk just finished, and it's still fresh in my brain.)

Comments

Traveling Gasses

[baronet.livejournal.com]

Alas, we live on the same planet as China, so some of that CO2 effects us anyway. It's a gas, and they travel a lot. Still, that only mitigates the effect slightly, as MOST of the effect is felt in China, maybe for all practical purposes, all of it.

Neat point of view. Thanks for sharing.

Re: Traveling Gasses

[dr-tectonic.livejournal.com]

Well, right, that's the point. If there were a global tax on carbon emissions, Chinese manufacturers would add the cost of that onto their goods, raising the prices, and our trade deficit with them would shrink and possibly vanish.

The Chinese bear the brunt of low air quality from smog (they use a lot more coal than we do in the U.S.), but everyone in the world gets hit by the greenhouse gases. (Arguably high-latitude folks are getting hit more and sooner, but that's another subject.)

[dpolicar]

Yeah, but you know a _lot_ about atmospheric CO2.

[navrins]

Yeah, by tomorrow you'll realize that all this industrial CO2 is just a bunch of hot air.

:-)

[ocschwar.livejournal.com]

*blink*blink* I think that reasoning dropped a minus sign somewhere, but I'm not sure.

[dr-tectonic.livejournal.com]

Nope. It's called "embodied carbon emissions".

Basically, it just means that the end-user of a product is the one who's responsible for the emissions generated in the use and production of the product. (After all, if there were no end-user, there would be no product.)

We currently don't account for the effects of trade when we tally up how much CO2 is being produced by different countries. If we did, we'd see that a significant chunk of China's CO2 emissions are for the benefit of consumers in the U.S.. If there were no trade defecit, our CO2 emissions would be higher and theirs would be lower.

This only really matters for things like treaties and trade negotations; if there were an actual carbon tax, the manufacturers would just tack it onto the consumer's price tag, and all the costs would become visible.

[melted-snowball.livejournal.com]

AFAIK, costs of CO2 emissions are still completely unclear, since it requires a lot of depreciation to estimate them, which requires an estimate of inflation for the next 50+ years...