We produce products and these products are consumed by other countries, especially the developed countries. This share of emissions should be taken by the consumers but not the producers. According to many researchers, not just from China...it is a very important item to make a fair agreement.
While it would be a logistically complex to assign China carbon credits based on the manufacturing emissions of various export products, proportional to export volume, and subsequently debt the country of import, it does raise a few brows, and exposes weaknesses in the Kyoto Protocol.
In an ideal emissions scheme, the consumer would pay for emissions emitted by the creation of a product, good or service, to negate the externalized costs associated with greenhouse gas emissions and climate change. In this idealized case, the manufacturer would internalize the cost of carbon emissions into its product, and either absorb it or pass it on to the consumer. An increase in carbon efficiency would reduce the carbon cost, and either make the product cheaper, or increase the manufacturer's profit margin.
This idealized system gets a bit more complex when you introduce international borders, since each country is responsible for their own emissions level measurement, verification, and enforcement. These domestic emission level goals become greatly affected when a manufacturer decides to operate in a different country, since country carbon emission goals are based on a percentage of a country's historic emissions levels. Assuming each country accurately measures and verifies their carbon emission levels, if there are no dramatic gains in overall carbon efficiency, industries in transit would reward the country losing the industry and penalizes the new host of industry by increasing carbon emission levels.
Say Country A experienced an exodus of an energy intensive industry (such as manufacturing) to Country B AFTER a historical emissions baseline has been set. This move would reduce Country A's emissions while penalizing Country B by pushing its emission levels beyond its prescribed allowance. If Country B has the same access to energy efficient technologies and practices as Country A, then the new industrial facilities will most likely be more efficient (from a greenhouse gas perspective), and have a substantial incentive to be built with carbon efficiency in mind due to Country B's emissions penalty. A successful example of increased carbon efficiency through relocation can be seen in the movement of aluminum manufacturing (a very energy intensive industry) to Iceland, a country well endowed with sources of clean and inexpensive geothermal energy. (I am uncertain if the Alcoa's move to Iceland was in part to hedge risk against a carbon emissions cap.)
In the case of China, 60% of energy is consumed by its domestic industry (source: LBNL), and 33% of all carbon emissions go towards the manufacturing of exports, 9% of which goes to the US and 6% goes to Europe (source: CICERO) Furthermore, carbon emissions increased a staggering 45% between 2002 and 2005, with 30% of the increase coming from the manufacturing of exports bound for Western Countries. China has essentially absorbed a lot of the manufacturing that has left the US and Europe after the Kyoto Protocol's recommended baseline year, 1990. To make any greenhouse gas reduction towards 1990 levels would be a huge challenge for China due to its newly adopted Western industry.
If it were feasible to objectively account for all carbon emissions in all products, from resource extraction to manufacturing, through the supply chain, to the consumer and finally to reuse (or recycle/disposal), then the embodied carbon emissions in the products should be accounted by the country of import. This practice would allow China the ability to make more realistic and fair emission reduction goals against 1990 Kyoto prescribed baseline levels. In addition, it would allow for any offshore industry to be more flexible from an emissions accounting sake, allowing industry to move around globally without impacting its host country's emissions cap, assuming the industry's end user demographics don't change. Furthermore, it would put the consuming country in charge of what imports would be allowed in, creating a potential "carbon embargo" or tax on goods deemed carbon inefficient.
However there are many hurdles that have to be overcome before we can accurately and transparently account and verify the total life cycle carbon emissions of a product, good or service. Until we do, carbon emissions from manufactured exports will be accounted for in the country's emissions allowance as defined by the current Kyoto Protocol.
