International trade is capable of allocating production to the most efficient places, and could be able to effectively reduce environmental impacts of production. The shift in production and the globalization of supply chains have not, however, decreased greenhouse gas (GHG) emissions so far. On the contrary, not only global emissions have increased worldwide, but emissions embodied in trade have increased faster than global gross domestic product (GDP), mainly due to emissions embodied in traded products between developing and developed countries. One of the concerns with the growing emissions embodied in trade is that of carbon leakage. Although there haven’t been found much evidence of a strong carbon leakage – i.e. increase of emissions in developing countries caused by the adoption of climate policies in developed countries – the growth of emissions transfers between developing and developed countries has been argued to be driven mainly by economic factors.
In the past decades advances in transportation and communication technology have allowed for a strong rupture in the regional links between production and consumption. In the past decades offshoring of manufacturing to resource-abundant countries have increased substantially. In this context, labour costs have been assumed to be an important driver to the migration of manufacturing stages, especially those characterized for high labour intensity, from capital-abundant economies to labour-abundant regions. Nevertheless, previous studies have shown that labour-abundant regions tend to present lower energy productivity. Thus, the relocation of manufacturing stages can lead to an overall increase in energy consumption and, ultimately, trim down the impacts of GHG reductions in developed countries.
We here analyse what are the drivers for changes in total labour footprints, how labour and energy have been allocated between industries and countries between 1995 and 2011. We compare production-based accounts and consumption-based footprints in global, regional, and national levels in 44 countries using an environmentally-extended multi-regional input-output (EE-MRIO) model, EXIOBASE. We highlight the main changes in allocation of production, energy, and labour force and costs in national and global supply chains, as well as how the shift in the production of intermediate and final goods between countries – what we here call outsourcing – has affected GHG embodied in international trade. We also perform a structural decomposition analysis (SDA) on the footprints, calculating the effect of different drivers on the changes in footprints of different regions in the period. EXIOBASE is a high-resolution macroeconomic model which details the flows of products in the world economy, coupled with socioeconomic and environmental pressure indicators in a consistent system of environmental and economic accounts. In the recently developed version 3, EXIOBASE details the global monetary flows between the production of 200 goods and services in 44 countries and five “Rest-of-the-World” regions for every year between 1995-2011. The 44 countries in the model comprise, together, for 87% of global GDP in 2011 (91% in 1995). Preliminary results show that outsourcing is an important driver for the emission growth in developed regions, offsetting gains in technology efficiency.
