Trading away damage: Quantifying environmental leakage through consumption-based, life-cycle analysis

This research quantifies the extent to which the US has shifted the environmental impact associated with the goods it consumes to other countries through trade. To achieve this, we use a life-cycle, consumption-based approach to measure the environmental impacts embodied in US trade activities for global warming potential (GWP), energy, toxics, and the criteria air pollutants. We use these values to determine the amount of environmental impact "leaked" from current, production-based approaches to analyzing national environmental trends for the years 1998-2004. We find that in 2004, with reasonable assumptions about the environmental intensity of imports and exports, this leakage exceeds 10% for all studied impacts, exceeds 20% for GWP, energy, and most criteria air pollutants, and exceeds 80% for lead emissions and toxics. By including the environmental impacts embodied in trade activities into national environmental accounts, we provide consumption-based, US per capita, environmental impacts, which we use to evaluate the relationship between income and environmental impact. We find evidence for rising per capita environmental impacts over time in the US, contra the Environmental Kuznets Curve. The paper concludes with a discussion of the implications for international environmental policy of increasing embodied emissions in trade.