International flows of embodied CO₂ with an application to aluminium and the EU ETS

The growth of international trade is increasing the separation between the location of consumption and the location of production and emissions. As a consequence of this growth, GHG emissions reported on a territorial basis can differ markedly from the global emissions required to produce the products consumed in a region. An overview is provided of emissions embodied in international trade, including an assessment of the role of both intermediate and final goods, and the impact that these flows have on territorial emissions. The global flows of embodied emissions driven by the EU consumption of aluminium are then examined in the context of the planned extension of the EU Emissions Trading Scheme (EU ETS), which is to include emissions from aluminium production from 2013 onwards. At the aggregate level, it is found that only around one-third of embodied CO₂ emissions in aluminium consumed in Europe are subject to a cost of CO₂ under the EU ETS, although this may vary for individual products or producers. The data and analysis presented on the international flows of emissions embodied in aluminium are relevant for evaluation of mitigation options for the European consumption of aluminium and other emissions-intensive sectors. Although the method is robust, the analysis can be made more policy relevant and specific with more disaggregated data sets.