Analysis Austria's CO 2 responsibility and the carbon content of its international trade Pablo Muñoz a,b, ⁎, Karl W. Steininger a,c a Wegener Center for Climate and Global Change, University of Graz, Austria b Institute of Environmental Science and Technology, Autonomous University of Barcelona, Spain c Department of Economics, University of Graz, Austria abstract article info Article history: Received 2 February 2010 Received in revised form 7 May 2010 Accepted 26 May 2010 Available online 6 July 2010 Keywords: Multi-Regional Input–Output analysis Embodied emissions Consumption-Based Principle Carbon leakage Carbon dioxide International trade Austria Seeking to limit global warming to 2 °C puts narrow restrictions on the remaining carbon budget. While the prevalent accounting framework for carbon emissions is production based (Production-Based Principle, PBP), we here quantify the CO 2 emissions on the basis of the Consumption-Based Principle (CBP) for Austria. At a methodological level, a Multi-Regional Input–Output model with full linkages is used to account for Austria's CO 2 responsibility on a global scale. Estimates are carried out for the years 1997 and 2004. Results show that during 1997 CO 2 responsibility based on CBP were 36% larger than those based on PBP. This relation has increased through time. The CBP indicator of 2004 was 44% larger than the PBP. In terms of carbon emission location, for each Euro spent on Austrian final demand in 2004, it is estimated that two- thirds of the CO 2 emissions occur outside Austrian borders. Regarding the origin of the emissions embodied in imports, it is estimated that about one-fourth originated in non-Annex I countries in 1997. This proportion increased to one-third by 2004. Due to this divergence between CBP and PBP indicators, there is a need to re- think current accounting bases in order to properly assign CO 2 responsibilities. © 2010 Elsevier B.V. All rights reserved. 1. Introduction The nature of the climate change phenomenon demands interna- tionally coordinated action in order to mitigate greenhouse gas (GHG) emissions. With regard to the stabilization of greenhouse gas concen- tration, the United Nations Framework Convention on Climate Change points out that all societies share common but differentiated respon- sibilities. The largest share of historical and current global emissions of greenhouse gases can be traced back to high income economies while the share of global emissions originating in low and middle income economies are currently at a low per capita level. The latter, however, will inevitably grow during the emerging process. The Kyoto Protocol, the largest international agreement on climate change mitigation, is aimed at committing a subgroup of high income economies to the reduction of their GHG emissions. The accounting emission system in the Kyoto Protocol is based on territorial considera- tions, i.e. environmental responsibilities ‘stop’ at the respective national borders of the countries concerned (IPCC, 2007). The literature usually refers to this accounting system as the ‘Production-Based Principle’ (PBP) (Munksgaard et al., 2009; Munksgaard and Pedersen, 2001; Pedersen and de Haan, 2009). This means that indicators only capture the envi- ronmental pressures which are somehow linked to the production of national goods and exports. However, the so called ‘carbon leakage problem’ emerges when emission inventories are only focused on the PBP and when climate change policies are unilaterally imposed by a single country or group of countries only. There are two core definitions with respect to the carbon leakage problem: 1) A first approach used to estimate the carbon leakage deals with emission flows that are embodied in imports. The carbon leakage in the Kyoto Protocol context is often defined as the flows of emission embodied in imports coming from non-Annex I countries to an Annex I country (Peters and Hertwich, 2008a). These amounts of CO 2 emissions are usually expressed as a percentage of the CO 2 responsibility from a production perspective, obtaining in this way a carbon leakage indicator. It is important to note that the above carbon leakage indicator is not solely explained by unilateral cli- mate change policies. There may be other factors, such as cheaper labour, lower standards of other environmental policy or the avail- ability of specific physical resources in non-Annex I parties, which make foreign production more profitable. Thus, this definition fre- quently called ‘weak leakage’ (Rothman, 1998) takes a more ho- listic view as it measures shifts in production which undermine climate policy irrespective of the cause. In this article we will use this approach and the country being taken into consideration from Annex I parties is Austria. 2) Nonetheless, a second approach defines carbon leakage as ‘the part of emissions reductions in Annex I countries (i.e. industrialised countries) that may be offset by an increase of the emissions in Ecological Economics 69 (2010) 2003–2019 ⁎ Corresponding author. Tel.: +43 316 380 8430; fax: +43 316 380 9830. E-mail address: pabloandres.munoz@campus.uab.es (P. Muñoz). 0921-8009/$ – see front matter © 2010 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2010.05.017 Contents lists available at ScienceDirect Ecological Economics journal homepage: www.elsevier.com/locate/ecolecon