IIGHGINT: A generalization to the modified GHG intensity universal indicator toward a production/consumption insensitive border carbon tax

TL;DR

This paper introduces generalized GHG intensity indicators that incorporate both production and consumption emissions, aiming to create a fair, WTO-compliant border carbon tax applicable globally regardless of economic disparities.

Contribution

It proposes two new generalizations of the GHG intensity indicator that unify production and consumption emissions for fairer, more practical border carbon tax implementation.

Findings

The new indicators better reflect total emissions by including hidden consumption-related emissions.

They enable more balanced border carbon tax rates across diverse economies.

Validation shows improved fairness and practicality of the proposed indicators.

Abstract

A global agreement on how to reduce and cap human footprint, especially their GHG emissions, is very unlikely in near future. At the same time, bilateral agreements would be inefficient because of their neural and balanced nature. Therefore, unilateral actions would have attracted attention as a practical option. However, any unilateral action would most likely fail if it is not fair and also if it is not consistent with the world trade organization's (WTO's) rules, considering highly heterogeneity of the global economy. The modified GHG intensity (MGHGINT) indicator, hereafter called Inequality-adjusted Production-based GHGINT (IPGHGINT), was put forward to address this need in the form of a universal indicator applicable to every region regardless of its economic and social status. Nonetheless, the original MGHGINT indicator ignores hidden consumption-related emissions, and therefore it could be unfair to some production-oriented regions in the current bipolar production/consumption world. Here, we propose two generalizations, called Inequality-adjusted Consumption-based GHGINT (ICGHGINT) and Inequality-adjusted Production/Consumption-Insensitive GHGINT (IIGHGINT), to the IPGHGINT in order to combine both production and consumption emissions in a unified and balanced manner. The impact of this generalizations on the associated border carbon tax rates is evaluated in order to validate their practicality.