Greenhouse gas emissions embedded in agricultural trade : implications and potential opportunities for Asia-Pacific

Abstract

Greenhouse Gas (GHG) emissions are the main driving force of climate change, and all economic sectors need to internalize their costs. Food systems (including land use, production, refrigeration, food processing) account for a quarter of global GHG emissions. Agricultural exports in Asia-Pacific account for 18% of total exports, twice as much as in the rest of the world. Pacific Island Developing States (PIDS) and New Zealand, are particularly reliant on trade in agriculture. Agricultural export shares of many PIDS significantly exceed the global average of 9%, while New Zealand agricultural exports account for 31% of its total exports.  This study sought to estimate the CO2-equivalent content of agricultural trade in Asia and the Pacific, and examine the ramifications of potential carbon tariffs, such as the European Union’s Carbon Border Adjustment Mechanism as well as global carbon tariffs, using partial equilibrium analysis. We find that half of emissions embedded in agricultural trade in the region are due to farming (such as methane emissions from ruminant stock), and a quarter is due to land use change (deforestation), while only 4% of emissions in agricultural trade in the region is due to transport. The findings imply that carbon taxing transport alone may be counterproductive to climate action as lower cost/bulkier food products would be taxed at a relatively higher price due to their lower carbon content to weight ratio. Asia-Pacific is a net importer of GHG emissions embedded in the agricultural products considered. The emissions intensity is lower for exports than for imports (3.3 CO2 kg per $1 for exports vs 3.5 CO2 kg per $1 for imports), indicating that regional demand is more CO2 intensive than foreign demand. Economies that rely on carbon intensive agricultural products, such as beef, are found to be at the greatest risk from potential carbon tariffs: the meat sector would bear the brunt of global charges, followed by animal oils given the high amount of CO2 embedded in these products. Even relatively small surcharges may have a large effect on mean exports for such products. However, in the scenario of European Union’s Carbon Border Adjustment Mechanism (due to data limitations, applied externally only), if it were to include agricultural products in the future, overall Asia-Pacific agricultural exports would only be reduced by 3%, though decreases would be significantly more pronounced for the Pacific subregion. Interestingly, the Asia-Pacific region as a whole is a net importer of CO2 equivalent emissions embedded in agricultural products. As such, for most of the economies in the region, implementing some form of carbon tariffs on foods with high emission-to-calorie ratios, such as beef, may be worth considering as part of trade-related climate action, subject to further detailed studies of socio-economic impacts.