Examining the efforts of a small, open economy to reduce carbon emissions: The case of Denmark

a r t i c l e i n f o It is generally understood that greenhouse gasses produced by human activities are having a warming effect on the climate. Discussions concerning efforts to curb carbon dioxide emissions often focus on large countries. However, considerable resources have been spent to reduce carbon dioxide emissions by relatively small, open economies. Although, these economies are small players in international markets, international trade has an important influence on their economies. Investigating the outcome of efforts to curb emissions by these small, open economies provides insights into the situation faced by a large set of the world's economies. This paper has three objectives: (1) investigate the outcome of Denmark's efforts to reduce its carbon emissions by characterizing the relationship between Denmark's macroeconomic activity and carbon emissions; (2) determine the carbon content of Danish trade and document the important effects that growing trade with China has had on Danish consumption emissions; and (3), investigate the robustness of measures of consumption emissions under varying information requirements. Our analysis of the outcomes of Danish efforts to reduce carbon emissions suggest two, related lessons. First, small, open economies, should track both production and consumption emissions when evaluating their progress towards reducing carbon emissions. Second, international trade should be considered in the design of environmental policy. The Danish experience indicates that increasing trade with a much larger and more emission intensive country can have substantial influence on consumption emissions. It is generally understood that greenhouse gasses produced by human activities are having a warming effect on the climate (IPCC, 2014). Carbon dioxide (CO 2), which is emitted by burning various fossil fuels (coal, natural gas, and oil, for example) is the primary greenhouse gas and reducing CO 2 emissions remains a priority on most political agendas around the world. Various policies and international agreements have been implemented to reduce carbon dioxide emissions. Discussions concerning efforts to curb carbon dioxide emissions often focus on large countries, China, United States, and India, for example. However, considerable resources have been spent to reduce carbon dioxide emissions by relatively small, open economies. Although these economies are small players in international markets, international trade has an important influence on their economies. Expanding trade with a much larger trading partner , China for example, can have a large effect on the smaller economy , but an insignificant effect on the Chinese economy. Investigating the outcome …