How the EU is inflating its CO2 achievement

Europe has made strides on restricting CO2 emissions but as it's now importing more carbon-intensive goods, its two steps forward must be viewed in light of a big step back.

The European Union is inflating its position as a leader in tackling global climate change by ignoring the impact of its fall in industrial competitiveness, which means the region is now importing more carbon-intensive goods.

Carbon dioxide (CO2) emissions from burning fossil fuels in west Europe have fallen over the past two decades, but the carbon content of consumption accounting for net imports has risen.

Focusing purely on emissions by territory, as the EU does, ignores global international trade as if all economic activity were in isolation. It is a kind of smoke and mirrors that only tells half the story.

Such incomplete data help explain why the Kyoto Protocol has achieved so little to clean industrial pollution as it has diminished the impact of CO2 reduction targets by making these easier to achieve.

Climate Commissioner Connie Hedegaard said this week the EU had cut its environmental impact even while its economy grew, implying it had achieved the Holy Grail of sustainable growth.

"While our economy grew 48 per cent since 1990, emissions are down 18 per cent. These figures prove once again that emissions can be cut without sacrificing the economy," she said.

It is true that the EU has grown its economy much faster than its emissions, reflecting a long-term trend towards efficiency, but by selecting one favourable measure it exaggerates its success.

Consumption emission figures which account for net imports tell a different story, through 2008: GDP up 46.8 per cent, CO2 down just 1.8 per cent.

Consumption emissions have actually risen in western Europe. Wider EU emissions have fallen only because of an industrial collapse in eastern Europe in the aftermath of the fall of communism in 1989.

Consumption vs production

Production emissions, which mostly come from the burning of fossil fuels to produce energy for households and industry, are the usual measure of CO2.

It is easy to measure, calculated from widely available data on fossil fuel consumption, and is the default UN figure used for reporting emissions under international targets.

An alternative measure of consumption emissions is more difficult to estimate, showing the impact of consumption of a country's people and industry on global climate change.

It records the CO2 embodied in goods consumed by a country's people and industry, including imports and excluding exports.

This measure is more relevant when assessing progress towards a low-carbon economy.


Comprehensive data on consumption emissions have been developed by Glen Peters at Norway's Centre for International Climate and Environmental Research, showing trends from 1990-2008.

They show the EU's consumption emissions fell 1.8 per cent, while production emissions fell 6.5 per cent against the 1990 baseline used by Hedegaard.

The results are more stark after removing a quirk of that baseline, which coincides with the immediate aftermath of the fall of communism when industrial manufacturing in eastern Europe contracted sharply.

Consumption emissions of the 15 western European member states have risen 3.7 per cent.

A 2011 journal article that accompanied the data, "Supply chain of CO2 emissions", reinforces the point.

The paper published in the US Proceedings of the National Academy of Sciences showed the European Union was by far the world's single biggest net importer of carbon.

It showed that the EU imported a net 2.621 billion tonnes of carbon dioxide in 2004, far exceeding the United States in second place.


If the bloc's performance were based on a measure of consumption of goods and services, the EU would not meet its carbon reduction targets under the Kyoto Protocol.

The original 15 members of the EU at the time of the signing of Kyoto had a target to cut emissions by 8 per cent by 2008-2012 from 1990 levels.

The first round of Kyoto ends this year and has failed from the perspective of global emissions.

Since Kyoto was signed in 1997, global carbon emissions have risen by 2.4 per cent annually, twice the annual rate in the decade before it was signed, notwithstanding the financial crisis since 2008.

A carbon accounting system that allowed the EU to ignore its rising, carbon-intensive imports from China has not helped, particularly since China's emissions were not regulated by the protocol.

The value of EU-27 imports from China almost tripled between 2001 and 2008, according to Eurostat, the Statistical Office of the European Union.

There is no denying the EU's achievements on climate change.

It has the most ambitious targets globally to cut carbon, the broadest mandate to shift to renewable energy, and is leading UN climate negotiations, which may have collapsed without its willingness to adopt reduction targets.

But a nuance is missed when developed countries exhort emerging economies to do more about their rising emissions, when failing to acknowledge that their own consumption is partly responsible.

This article was originally published by Reuters. Republished with permission.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles