Carbon Emissions Embodied in India–United Kingdom Trade: A Case Study on North–South Debate

From Foreign Trade Review

Pollution haven hypothesis (PHH) represents a situation where the incentive-driven economic activities those are polluting in nature, arguably getting necessary zest in some countries and stringent regulations in some others which creating a scope of comparative advantage for those pollution havens in pollution intensive commodity trade.

Concrete decision of whether PHH holds or not is not yet arrived in a recognizable fashion from either theoretical or empirical studies and there is a complete array of arguments and counterarguments in the literature behind this inconclusiveness.

However, CO2 emissions are creating severe global environmental problems from various anthropogenic activities throughout the world is an unambiguous truth no matter where they are taking place. Shifting of pollution loads from the highly regulated developed countries to the under-regulated developing countries could not solve the adverse effects of pollution in any meaningful way because the atmospheric concentration of the greenhouse gases (GHGs) can harm every citizen of this world potentially equally by affecting the global climatic conditions. International cooperation is therefore felt as a pre-condition in the process to limit these GHG emissions. However, the Kyoto Protocol (signed in December 1997) allocated the carbon emission reduction targets unevenly between Annex-I or developed countries and non-Annex-I or developing countries.

Mostly, the high-income countries came under this obligation and they are called Annex-B countries. The non-Annex-I countries were exempted from such legally binding targets and allowed to maintain a voluntary and nationally appropriate mitigation policy for GHG emissions.

This created many doubts and debates from both academic and political fields of thought on the effectiveness of unilateral carbon mitigation initiatives attempted by individual countries or country-groups for limiting the aggregate world emissions and that gave birth to a new possibility and presumption of ‘carbon leakage’. This study in the context of ‘carbon leakage hypothesis’ is an attempt to investigate the North–South international trade and the associated CO2 emission embodied in bilateral trade, of both directions.

In this regard, India–UK country pair is taken as a case for calculating the CO2 emissions embodied in this developing–developed Pollution haven hypothesis (PHH) represents a situation where the incentive-driven economic activities those are polluting in nature, arguably getting necessary zest in some countries and stringent regulations in some others which creating a scope of comparative advantage for those pollution havens in pollution intensive commodity trade.

Concrete decision of whether PHH holds or not is not yet arrived in a recognisable fashion from either theoretical or empirical studies and there is a complete array of arguments and counter-arguments in the literature behind this inconclusiveness. However, CO2 emissions are creating severe global environmental problems from various anthropogenic activities throughout the world is an unambiguous truth no matter where they are taking place.

Shifting of pollution loads from the highly regulated developed countries to the under-regulated developing countries could not solve the adverse effects of pollution in any meaningful way because the atmospheric concentration of the greenhouse gases (GHGs) can harm every citizen of this world potentially equally by affecting the global climatic conditions. International cooperation is therefore felt as a pre-condition in the process to limit these GHG emissions. However, the Kyoto Protocol (signed in December 1997) allocated the carbon emission reduction targets unevenly between Annex-I or developed countries and non-Annex-I or developing countries.

Mostly, the high-income countries came under this obligation and they are called Annex-B countries. The non-Annex-I countries were exempted from such legally binding targets and allowed to maintain a voluntary and nationally appropriate mitigation policy for GHG emissions. This created many doubts and debates from both academic and political fields of thought on the effectiveness of unilateral carbon mitigation initiatives attempted by individual countries or country-groups for limiting the aggregate world emissions and that gave birth to a new possibility and presumption of ‘carbon leakage’.

This study in the context of ‘carbon leakage hypothesis’ is an attempt to investigate the North–South international trade and the associated CO2 emission embodied in bilateral trade, of both directions. In this regard, India–UK country pair is taken as a case for calculating the CO2 emissions embodied in this developing–developed bilateral trade.

The UK stands as the fifth largest trading partner for India after the USA, UAE, Hong Kong and China and the largest export destination among the 43 Annex-I countries including the European Union which ratified the Kyoto Protocol before the treaty came into force in February 2005. bilateral trade.

Article details
Carbon Emissions Embodied in India–United Kingdom Trade: A Case Study on North–South Debate
Suvajit Banerjee
First Published April 23, 2020 Research Article
DOI: 10.1177/0015732519894149
Foreign Trade Review