Climate dialogues should include carbon emissions in trade

This week, the 30th Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC COP30) takes place in Belém, Brazil. Representatives from almost every country will meet to discuss new plans to limit global warming to well below 2 degrees Celsius.

Trade Policy Advisers Erik Merkus and Mai Ahrne Bojang.

Trade and trade policy can and should play a larger role in these global discussions. Around a quarter of the world’s carbon dioxide emissions are embedded in products and services that cross international borders. Embedded carbon, as a concept, includes all emissions generated during the production process, transportation, and consumption of a product or service. Some of these emissions can and do take place outside the country where the product or service is consumed; therefore, any real discussion on ‘decarbonisation of the economy’ needs to consider this cross-border element.

Around a quarter of the world’s carbon dioxide emissions are embedded in products and services that cross international borders.

Most climate policies, including those discussed at COP30, focus on production-based emissions, as these are most easily targeted through domestic policies. This opens the door to a so-called ‘carbon loophole’, which arises when domestic production-based emissions decrease while imports of carbon-intensive goods and services produced elsewhere increase.

In figure 1, the difference between the two lines indicates the minimum level of imported embedded carbon for Sweden, which in 2023 stands at around 3 tonnes per capita (among the highest relative to other European countries).


Sweden has decreased its production-based CO2 emissions from 6.2 tonnes per capita in 2000 to 3.5 tonnes per capita in 2023. Emissions based on consumption in Sweden, however, amount to 6.5 tonnes per capita in 2023.

What role can trade policy play? In general, all trade liberalisation could potentially have an impact on the emission intensity of trade flows. The spread of cleaner production technologies may benefit from open trade, and market forces could support cleaner production in countries with comparative (green) advantages. Whether this occurs in practice remains to be seen. The EU actively incorporates climate considerations into its trade policy by including chapters on trade and sustainable development (TSD) in recent trade agreements. These chapters state that trade partners should effectively implement policies in line with the Paris Agreement and promote trade that contributes to climate change mitigation.

In general, all trade liberalisation could potentially have an impact on the emission intensity of trade flows.

The emission intensity of the EU’s imports, disaggregated by type of trading partner, is presented in Figure 2. Embedded emissions in imports from partner countries with trade agreements fall between these two groups and are relatively stable over time. The largest reduction in embedded emissions is observed for imports from countries without a trade agreement with the EU. This may indicate that production in these countries is becoming less emission-intensive, or alternatively, that the EU is importing fewer high-emission goods from these countries.


Embedded emissions in imports are consistently highest from countries with which the EU has no trade agreement and lowest from other EU Member States.

Moving forward, we conclude the following in global climate negotiations:

  • A pure focus on domestic carbon emissions potentially misses the role of imported embedded emissions, overlooking the contribution of trade and trade policy.
  • Trade agreements could do more to lower embedded emissions in trade, for instance by including specific provisions to liberalise trade in climate goods and services, reduce fossil fuel subsidies and promote green technology transfer to low- and middle-income countries.
  • Trade-related environmental measures to support decarbonisation globally should be used as long as effective global carbon pricing instruments are absent, including the EU’s Carbon Border Adjustment Mechanism (CBAM).

Discussions at COP30 are now underway, and trade and trade policy should not be neglected.

Mai Ahrne Bojang
Trade Policy Adviser

Erik Merkus
Trade Policy Adviser