Embedded Emissions in Traded Goods

For a traded good, embedded emissions are the greenhouse gas emissions attributed to making that good, even when production occurs in another country. They can include emissions from manufacturing, the energy used and relevant material inputs, depending on the accounting method. The term describes the good's emissions footprint, not greenhouse gases physically contained in it.

Which emissions are counted?

Embedded emissions connect a finished product with the emissions generated along its production chain. The coverage depends on the system boundary, which specifies the processes and stages included in the calculation.

• Direct emissions arise from production processes, such as burning fuel in a furnace or chemical reactions during manufacture.
• Indirect emissions can arise from generating the electricity used in production.
• Emissions associated with producing material inputs may also be attributed to the finished good under the applicable accounting rules.
• Embedded production emissions are not automatically the same as a full life-cycle footprint, which may additionally cover distribution, use and disposal.

How embedded emissions are measured

Emissions are commonly expressed as carbon dioxide equivalent, which allows different greenhouse gases to be reported using a common measure. A product's emissions intensity expresses the attributed emissions per unit of output, such as tonnes of carbon dioxide equivalent per tonne of steel.

• The emissions attributed to a traded quantity depend on both its emissions intensity and the quantity traded.
• Goods of the same type can have different embedded emissions because producers use different technologies, fuels, electricity sources and inputs.
• Reliable comparison requires consistent accounting boundaries and credible production data; some regulatory systems permit default values where actual emissions data are unavailable.

Why the concept matters for international trade

Trade separates the location where goods are produced from the location where they are consumed. Embedded-emissions accounting helps identify the emissions associated with imported goods and links climate policy with production choices across global value chains.

• Carbon border adjustments can apply a carbon-related obligation to imports based on specified embedded emissions.
• Such measures seek to address carbon leakage, including the risk that production shifts to jurisdictions with weaker carbon constraints.
• For exporters, lower-emission production and reliable emissions records can affect competitiveness where importing markets impose carbon-related requirements.