Carbon Dioxide Emissions associated with Greece s Trading Structure: Methodology and Pilot Results for 1990 and 2000 by Eleni Papathanasopoulou Environmental, Social and Economic Research Group (ESERG) For the ETSG Conference 13-15 September 2007, Athens, Greece Abstract The aim of this paper is to ascertain to what extent Greece s trading structure has changed between 1990 and 2000 and the implications on carbon dioxide emissions. It is often argued that as countries develop they shift from an agrarian, to manufacturing, to service-based economy. It is often presumed that the associated environmental impacts, such as carbon dioxide emissions, of such shifts decrease. This phenomenon is explained by the assumption that service industries require lower amounts of resources than manufacturing industries and therefore have lower environmental impacts. However, it is also argued that as countries develop these shifts in economic structure, environmental problems are translocated to trading partners creating pollution havens abroad. This is explained by the supposition that as an economy shifts to services, there is still a demand for manufactured goods by consumers. Production of these goods therefore takes place abroad and the resulting environmental impacts associated with production remain in the producing country. These findings would therefore imply that even though an economy may be seen to be reducing its carbon dioxide emissions, in fact it is only translocating the emission abroad resulting in increasing global emissions. To gain insights into the relevance of these suppositions for Greece, the paper firstly compares how the percentage of goods from the agricultural, manufacturing and service sectors have changed in terms of Greece s exports and imports over the 10 year period. The monetary value of Greece s exports and imports are then converted to carbon dioxide (CO2) emissions. This is carried out by using carbon dioxide intensity vectors and input-
output techniques. The input-output techniques allow both the direct and indirect CO2 emissions along the whole supply chain to be considered in the production of exports and imports. This process enables the CO2 emissions associated with Greece s imports and exports to be compared and the CO2 trade balance calculated offering insights into whether Greece is a creator of pollution havens or not. The paper concludes by arguing that monitoring carbon emissions associated with Greece s imports of goods and services is as important as monitoring the emissions associated with its exports. The insights of the research will show how the dynamics of trade and its associated environmental impacts need to be understood so that positive initiatives to reduce overall global carbon emissions can be successfully engineered. 1. Introduction Climate change is now cited as one of the most challenging and imminent problems of our times. It is caused by the increasing concentration of anthropogenic greenhouse gases generated primarily due to the combustion of fossil fuels, agriculture, and land-use changes (IPCC 2001:4). Subsequently, the global average surface temperature over the last 140 years has been rising causing sea levels to also rise. Such climatic changes are believed to affect the frequency of droughts and floods resulting in increased ecological and socio-economic impacts such as the reduction in crop yield, decreased water availability, increases in the number of people exposed to vector-based and water-borne diseases and increased risk of flooding (Flavin et al. 2002:29). International voluntary agreements, such as the Kyoto Protocol, promote the reduction of greenhouse gas emissions by signatory countries. Under the Kyoto Protocol, the European Union (EU) was given a target to reduce its overall greenhouse gas emissions by 8% below its 1990 levels within the period 2008-2012. As part of the EU, Greece had the possibility of increasing its emissions by 25% of its 1990 level so as not to hinder its economic development. By 2006, Greece s greenhouse gas emissions had already passed this allowance and forecast to increase to over 38% by 2010.
Carbon dioxide emissions account for the majority of total emissions of greenhouse gases, as it is responsible for approximately 80.6% of total emissions in Greece in 2000 (Ministry for the Environment, Physical Planning and Public Works 2002:9). Carbon dioxide (CO 2 ) emissions are predominately released in the combustion of fossil fuels for energy purposes. One way of reducing CO 2 emissions is through technological improvements as well as improved efficiencies along the supply chains of industries to produce goods and services (UN 1992). There is also the argument that as countries develop, their dominant economic sectors change from agrarian, to manufacturing, to service-based sectors. It is often assumed that these service sectors are less energy and material intensive resulting in reduced environmental impacts what is know as the environmental Kuznets curve (Malebaum 1978). However, it is also argued within the North-South debates that as countries move to more service-orientated production structures, their environmental problems are translocated to trading partners creating pollution havens abroad. This is explained by the supposition that as an economy shifts to services, there is still a demand for manufactured goods by consumers. Production of these goods therefore takes place abroad and the resulting environmental impacts associated with production remain in the producing country (Ekins 1997). These findings would therefore imply that even though an economy may be seen to be reducing its CO 2 emissions, in fact it is only translocating these emission abroad resulting in increasing global emissions. The aim of this paper is to ascertain to what extent Greece s trading structure has changed between 1990 and 2000 and the implications for carbon dioxide emissions. This will also allow insights into the relevance of the North-South debate for Greece. The paper firstly compares how the trading structure of Greece in 1990 and 2000 has changed as a percentage of total export and import contribution (Section 2). The monetary value of Greece s exports and imports are then converted to carbon dioxide emissions. This is carried out by using carbon dioxide intensity vectors and input-output techniques which are described in Section 3. The input-output techniques allow both direct and indirect
carbon dioxide emissions attributable to traded goods to be approximated and compared (Section 4). These research findings and their contribution to the pollution haven debate are discussed in Section 5. 2. Greece s Trade Structure: 1990 and 2000 Greece s trade structure has changed between 1990 and 2000 to reflect the dominance and reliance of particular traded goods. In 1990, Greece s main exports were from the agricultural and manufacturing sectors which accounted for 77% of total exports. Specifically, agricultural products and food represented 24%, textiles and leather products 15%, coke and petroleum products 11%, basic metals 8% and machinery/equipment 8% (Figure 1). Exports of services made up the remaining 23%, with wholesale and retail services representing 11% of this total. In 2000 there is a visible shift of export goods towards the services (Figure 1). The agricultural and manufacturing sectors now only account for 56% of the total, while exports in services make up the remaining 44%. Increases in exported services such as hotels/restaurants (8%), financial services (26%), public administration (5%) and recreational services (2%) have all contributed to the increased prominence of services in the basket of traded goods.
30 25 Exports 1990 Exports 2000 20 15 10 5 0 Agriculture Fishing Mining & Quarrying Food Manufacture Textiles and Leather Wood Products Paper, Printing and Publishing Coke and Petroleumn Products Chemicals and Chemical Products Non-Metal Mineral Products Basic metals and fabricated metal products Fabricated metal products Machinery and equipment Percentages Electricity,gas,steam and hot water Construction Work Whole sale and retail sale Hotel and Restaurant Services Transports Financial intermediation services Real estate services Public administration and defence services Education Services Health and Social Services Recreational and other services Fig.1. Greek Exports 1990 versus 2000 (Source: Greece s National Statistics Office) Some of the changes in Greece s trade structure as presented in Figure 1 are quite unexpected Firstly, there is the very low percentage contribution of food to total exports in 2000 which is recorded at 4% by Greece s National Statistics Office. Whereas the Export Research Centre (KEEM) reports Greece s exports of food goods in 2000 at approximately 15%. Additionally, exports of coke and petroleum products based on national statistics is recorded at 1% in 2000. KEEM s data shows Greece s exports of these products to be about 14%. Based on the inconsistency of these data, caution will be required in the interpretation of the results. Changes in Greece s import structure are not as visible as its exports. Comparison of Greece s 1990 and 2000 import structure shows that there have been mainly increases in the contribution of the service sectors to imports (Figure 2). However, the fuels and manufacturing sectors remain dominant in both 1990 (accounting for 97%) and 2000 (accounting for 81%).
35 30 Imports 1990 Imports 2000 25 20 15 10 5 0 Agriculture Fishing Mining & Quarrying Food Manufacture Textiles and Leather Wood Products Paper, Printing and Publishing Coke and Petroleumn Products Chemicals and Chemical Products Non-Metal Mineral Products Basic metals and fabricated metal products Fabricated metal products Machinery and equipment Electricity,gas,steam and hot water Construction Work Whole sale and retail sale Hotel and Restaurant Services Transports Financial intermediation services Real estate services Public administration and defence services Education Services Health and Social Services Recreational and other services Percentages Fig. 2. Greek Imports 1990 versus 2000 (Source: Greece s National Statistics Office) Greece s trade balance in 1990 was calculated as a 1.7 billion drachma deficit. The main sectors contributing to this deficit were the mining/quarrying, chemical and machinery/equipment sectors. While in 2000, Greece s deficit was 0.2 billion euros with a larger arrange of sectors contributing to this deficit such as: mining/quarrying, rubber & plastic goods, electrical equipment, transport equipment and services. However, even though these statistics shed light on the types of trade Greece is involved in, it tells us little about the carbon dioxide levels associated with these trade structures. To gain this insight and to contribute to the debate on pollution havens, carbon dioxide emissions are attributed to Greece s exports and imports in 1990 and 2000. The methodology described in the following section was used to perform the calculations.
3. Methodology Total carbon dioxide (CO 2 ) emissions attributable to traded goods are approximated by using a standard environmental input-output model. The model consists of a vector of carbon dioxide (CO 2 ) intensity coefficients (e), a Leontief inverse matrix, (I - A) -1, and a final demand vector which in this paper is either exports (X) or imports (M). Total carbon dioxide emissions attributable to exports (C X ) are defined by: C X = e (I A) 1 X. (1) The coefficients of the vector e, e if, are described as follows: e if f i = c f (2) xi where: f i is the quantity of fuel type f used in sector i (i=1 to j) c f is the carbon emission factor for fuel type f x i is the output of sector i The attribution of CO 2 emissions to imports require that the industrial structure and fuel mix of each trading partner be known. As this is complex and in many instances impossible task, a simplifying assumption was made. As in the paper of Machado et al. (2001), this paper is concerned with the amount of CO 2 emissions saved or displaced by the domestic economy through importing goods and services (ibid:414). Therefore, CO 2 emissions which the domestic economy would emit if it was to produce the goods it imports, C M, is carried out by multiplying the domestic economy s CO 2 intensity coefficients by the domestic economy s Leontief inverse and its final demand vector of imports. C M is therefore defined by:
C M = e (I A) 1 M (3) In order to investigate whether Greece s exports are more carbon dioxide intensive than its imports, a pollution trade balance (or unwanted trade balance) (UTB) is calculated. UTB is calculated by deducting the carbon dioxide emissions attributable to a country s exports (C X ) from the carbon dioxide emissions attributable to its imports (C M ), i.e. UTB = C M C X (4) A positive result indicates that a country s imports are more pollution intensive than its exports and therefore its trading partners are pollution havens. A negative result highlights the domestic economy s role as a pollution haven for its trading partners. 4. Results The CO 2 emissions attributable to Greece s exports in 1990 amounted to 17 Mt CO 2 emissions. The majority of the emissions are clustered around the outputs from the sectors: food products (1.8 Mt CO 2 ), textiles (1 MtCO 2 ), coke and petroleum products (2.7 MtCO 2 ), non-metal products (1.2 MtCO 2 ), metal products (2.6 MtCO 2 ) and transportation (4.4 MtCO 2 ). The CO 2 emissions attributable to Greece s imports approximated to 29 MtCO 2 emissions. The main imported goods contributing to this total were: food products (2.1 MtCO 2 ), chemicals and chemical products (4 MtCO 2 ), basic metals (4 MtCO 2 ) and machinery and equipment (8 MtCO 2 ). The unwanted trade balance (UTB) is the difference between to total CO 2 emissions attributable to Greece s imports and exports. In 1990 this equated to 11.7 MtCO 2. The main trade products contributing to this positive UTB in 1990 are: mining & quarrying, chemicals, basic metals and machinery & equipment (Figure 3). The few sectors where Greece has a negative UTB, i.e. CO 2 emissions of exports are higher than imports, are the coke & refined petroleum, wholesale/retail and transport sectors.
Recreational and other services Membership organization services n.e.c Membership organization services n.e.c Public administration and defence services Real estate services Financial intermediation services Transports Hotel and Restaurant Services Whole sale and retail sale Construction Work Electricity,gas,steam and hot water 1-4 -2 0 2 4 6 8 MtCO2 Machinery and equipment Fabricated metal products Basic metals and fabricated metal products Manufacture of other non-metalic mineral products Manufacture of chemicals, rubber and plastic products Manufacture of coke, refined petroleum and nuclear fuel Pulp,paper and paper products Wood and wood products Manufacture of textiles, etc Manufacture of food products, beverages, tobacco Mining of metal ores etc Mining of coal etc Fishing Agriculture Fig 3 Greece s 1990 CO 2 Trade Balance The above results are more or less in line with what could be expected from Greece s export structure (as seen in Figure 1). Its exports in 1990 were heavy in the agriculture and food, textiles and transport sectors. However, it is highly dependent on the imports of fuels, chemicals, machinery and transport equipment to support its domestic economic outputs. It is the volume of these imports and their energy input structure which causes the CO 2 emissions attributable to these traded goods to be high. In 2000, the CO 2 emissions attributable to Greece s exports totalled 19 MtCO 2 emissions. This is an increase of 11% on 1990 levels. However, the sectors which make up this total are significantly different from the 1990 sectors. The electricity, gas and water supply sector contributes 19% to total CO 2 emissions attributable to exports, followed by machinery and equipment sector (17%), electrical equipment (11%) and chemicals (9%). The total CO 2 emissions attributable to Greece s imports approximated 62 MtCO 2, an increase of 113% on 1990 levels. This large increase is centred on the following sectors:
coke and petroleum products (4 MtCO 2 ), machinery and equipment (5 MtCO 2 ), electrical equipment (11 MtCO 2 ), electricity (11.2 MtCO 2 ) and transportation (6 MtCO 2 ). The UTB for 2000 is positive at 43.4 MtCO 2, approximately four times that of 1990. Figure 4 shows how this trade balance is constructed. Electrical equipment accounted for the majority of the CO 2 emissions trade balance. Import of electricity, gas and water supplies, other manufactured goods and transportation and communication are the other prominent sectors contributing to the positive trade balance. 1-2 0 2 4 6 8 10 MtCO2 Home Services Other Community, Social and Personal Services Health and Social Services Education Services Public Administration and Defense Real Estate, Renting and Business Activities Financial Intermediation Transportation and Communications Hotels and Catering Trade Construction Electricity, Gas and Water Supply Other Manufacture Transportation Equipment Electrical Equipment Machinery and Equipment Metal Products Non-Metal Mineral Products Rubber and Plastic Products Chemicals and Chemical Products Coke and Petroleumn Products Paper, Printing and Publishing Wood Products Leather Products Textiles Food Manufacture Mining and Quarrying Fishing Agriculture Fig 4 Greece s 2000 CO2 Trade Balance In comparison with 1990 s individual UTBs (Figure 3) it is noticeable that in almost every sector the unwanted trade balance has increased in absolute terms. With Greece s CO 2 emissions attributable to its exports increasing only slightly, the increasing UTB is due to the increasing imports. It is also noticeable that in 1990 only two individual UTB s were over 2 MtCO 2. In contrast, in 2000 seven individual UTBs were well over the 2 MtCO 2 mark.
5. Discussion It could be argued that Greece is actually responsible for more CO 2 emissions than it produces. Presently, international agreements such as the Kyoto Protocol, are based on the amounts of greenhouse gas emissions produced within the country to satisfy final demand. In the case of CO 2 (one of the six greenhouse gases) this predominately includes the emissions from the combustion of fossil fuels for energy uses. Targets to reduce CO 2 levels therefore focus on changes in technology, industrial structures, energy mixes and final demand. However, very little is done to monitor how these changes impact the CO 2 emissions embodied in imported goods. In the case of Greece, it has been shown that the CO 2 emissions attributable to its imports increased from 29 MtCO 2 in 1990 to 62 MtCO 2 in 2000, an increase of 118%. It is reported by the National Observatory Athens that total CO 2 emissions for Greece increased by 27.4% from 82.8 MtCO 2 in 1990 to 105.5 MtCO 2 in 2002, a total which does not include imports. This highlights that even though Greece s CO 2 emissions are increasing due to domestic production of goods and services for final demand (including exports) they are not increasing at the rate of the CO 2 emissions embodied in Greece s imports. Trends of CO 2 emissions embodied in Greece s imports are also not being monitored. Pollution haven affects are often discussed in terms of the translocation of energy intensive industries and goods from a domestic economy to trading partners. This enables the domestic economy to reduce the negative pollution effects in manufacturing these goods in the domestic economy but still benefit from their uses through imports. Ultimately, it also allows the domestic economy to effectively reduce its absolute emissions of CO 2. It is not clear that Greece s trading structure has undergone this shift. The volume of imports and the CO 2 emissions attributable to imports are slowing the amount of CO 2 emissions produced in Greece, however, Greece s own CO 2 emissions are not as yet decreasing. Nevertheless, with restrictions on the level of CO 2 emissions set out by the Kyoto Protocol, it may be seen that Greece will continue to import goods not
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