Researchers have found that manufacturing standards and policies designed to curb greenhouse gas emissions in developed countries are actually increasing emission levels elsewhere.

Denmark, for instance, is known as one of the world’s cleanest countries. Its strict manufacturing standards have been reported as reducing greenhouse gas production by more than one million tonnes, as the country moves towards a fully renewable energy economy.

But research by Dr Clinton Levitt, a resource economist at the Tasmanian School of Business and Economics, has revealed that Denmark’s policies have actually led to an increase in emissions elsewhere, as manufacturers and businesses source their goods and manufacturing in countries such as India and China, where emissions standards are not as strict.

“Essentially, what these firms are doing is exporting emissions,” Dr Levitt said.

“We showed that Denmark is very successful at reducing emissions domestically, but consumption emissions – calculated by what the people actually consume – have been growing faster than the reduction in domestic emissions. So, emissions are actually increasing overall.”

Dr Levitt adds that right now the various agreements that countries have on reducing emissions are incomplete, because they include the impacts of manufacturing within their own economies but nowhere else.

Whether a business is in Denmark, Canada, or Australia, if it has to use processes that are cleaner or have higher energy costs, one of the results is that they introduce more imports from places without those restrictions.

Dr Levitt’s study received widespread publicity in Denmark, and interest from its parliamentarians. As a result, he is currently working on a much wider-scale follow-up study that’s tracking the individual business decisions of some 10,000 manufacturing firms across Denmark.

The follow-up study is a collaboration between the University of Tasmania, and the Copenhagen Business School in Denmark and is funded by Industry Denmark. The findings are expected to be published in early 2019.

“We’re studying manufacturing businesses with more than 10 employees, and looking at things like, are they importing more goods, and how they are making manufacturing versus import decisions,” said Dr Levitt.

He adds that one of the difficulties of such research is that you must take some of the information provided by the businesses “with a grain of salt”.

“Firms always make it clear that it’s very costly for them to abide by the environmental restrictions, and in response they have to change some of their processes, and so they say they need kickbacks – they need the government to help them. They’re always going to overestimate the costs,” he explains.

In addition, greenhouse gas emissions are usually harder for firms to take into account than other forms of pollution, but Dr Levitt says it’s even more important to do so now. 

As opposed to many more localised forms of pollution, it doesn’t matter where greenhouse gas emissions are produced – it affects everyone. Even if you’ve moved manufacturing to China, the impact is still felt in Denmark or Australia.

Dr Levitt’s research has joined a larger body of work that has already helped change some government policies on greenhouse gas emissions.

“Now when countries negotiate trade agreements, a big area of discussion is pollution control,” he said.

“In Denmark, for example, if they discuss trade outside the European Union, then environmental policy is part of those discussions.”

Find out about studying Business and Economics at the University of Tasmania here.

About Dr Clinton Levitt

Dr Levitt's research aligns with the Universities research theme of Environment, Resource and sustainability. His research in economics is focused on finding solutions to important issues; such as reducing greenhouse gas emissions, introducing renewable energy sources into power systems and efficient management of natural resources including tax and royalty design.

View Dr Clinton Levitt's full researcher profile