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2020-01-17Macro `n Cheese

Economic Supervision of all the Gretas

Roger has finally decided to cover a (forgive the pun) “hot” topic: carbon dioxide emissions. In particular, he addresses what he thinks is a common misperception - that it is only very poor, or very rich, countries that are sustainable.


Today, I will make one of my first forays (at least in this forum) into an issue that is on all our minds: climate change. Some believe it, some (still) don’t. And there is no middle ground, it seems.

– I, nonetheless, feel (for lack of a better word) that this is one of those issues where the paradigm “better safe than sorry” could and should be applied liberally. – So, there you have it, a disclaimer and revealed preferences in one. Please don’t think less of me.

Coming from a country that ranks high on all climate do-good lists, made interrail travels a status symbol (“train bragging” as the opposite of “flight shaming”), and– of course – also produced “Greta”, it is not certain that this blog will be an instant hit among my compatriots. Heaven forbid that I wind up upending some of that holier-than-thou aura that surrounds us Swedes when it comes to environmental issues.

But first, let’s start with some data on the emissions of fossil carbon dioxide.

Macrobond moment: It’s not only environmental/climate data that is in high demand from our customers, but also other “ESG-related” data. We’ve added tons of such data and will soon release a new organization of it that’s good for ESG-browsing. Side note: If you know of any ESG-data that is not already available in Macrobond, please send us a note so that we can add it (if possible).


In the first pane we can clearly see how stable per capita emissions are over time. The mean across countries (dark blue line) nearly doesn’t budge at all, and the median is, at least from the 1990’s onwards only very slowly moving upwards. In the lower pane we can, nonetheless, see how the mean CO2-intensity of GDP has trended downwards for many years (while the median seems quite stable).

The first takeaway is, thus, that reducing population growth seems to be a very good way of reducing emissions. I am uncertain how ready we are for such Orwellian policies, but it is clearly something to keep in mind when thinking of why CO2 emissions are on the rise and (keeping the sorely missed Hans Rosling in mind) why they will (under the assumption of continued investment in education, health and environment!) peter out some day. Hence, the question we will collectively need to address is – Are investments in health, education and environment big and/or productive enough?

Judging from the second pane, it is at least obvious that policy changes and investments are at least going in the right direction. Encouragingly, when dividing the two measures in the chart above we (of course) compute the GDP/capita, which demonstrates that over the past ten years GDP/capita (in CO2-equivalents) has remained more or less stable!


Good news indeed, but even more information can be extracted/deduced from these two, admittedly simple, charts. For example, the means are considerably higher than the medians in the first chart indicating that the distribution of emissions is heavily right-skewed and, thus, concentrated to a smaller number of heavy polluters. This is further underlined by the relation of the mean/median to the grey areas showing the distribution of emissions per capita and per GDP.

Now, it takes little analytical effort to understand that those high CO2-emitting countries are mainly commodity-dependent economies. And, also as expected, if a country additionally happens to be a rich country its CO2 footprint increases drastically. (You can check it yourself if you download the document in Macrobond.)


For clarity, I have deleted a few, tourism-dependent, island states from the ranking above which also chimes with what I really wanted to discuss in this blog. Because, as you can see, there are also a few other, non-commodity based, economies in there, e.g., China, South Korean, Taiwan etc.

These are typical “sweat-shop economies”; countries, which have taken over a lot of our “dirty work” in production and where environmental standards might be (are!) lower.

Commodity extraction, cheap imports, and tourism together with international transports services are also highly attributable to life in “rich” economies – and suggests that the representation of Sweden and other very high-income countries also as “green” economies should come with some major qualifications.

Truth be told, there are actually a number of excellent databases out there that try to address this issue (here, here, here and here) and that are not yet available in Macrobond (those of you that are clients know where to send your data demands!). However, those input-output-based measures also make extensive use of simplifications and assumptions (that are necessary) to make such vast, complex, datasets coherent.

Here, I thought we could explore another, more straightforward, approach. For simplicity, I start by calculating the CO2-content of countries’ import-adjusted exports[1]. Let’s begin by looking at the 30 countries with the most CO2-intensive exports:


To be sure, with a few notable exceptions, most countries have been able to reduce the CO2-content of their exports (compared to 2005, when the index is ‘1’). But it is also worth noticing that we find many of the East Asian and Eastern European “sweat-shop economies” as well as many other fierce export nations at the top of this list.

With the above in mind, countries with large imports from these countries can be said to emit CO2 by stealth; their domestic use/consumption[2] provoke emissions from other countries. Without being too speculative, I think there is even a risk that some countries (and companies) have deliberately, with the help of “green” policies (such as overly restrictive carbon taxes etc,) pushed production to countries where climate policies are more lax. This is why environmental policies are best decided on an international level.

[1] Dividing each individual country’s industrial emissions by its exports in value added terms. This, nota bene, implies that we assume all domestic production carry the same CO2-intensity.

[2] And, yes, those emissions should perhaps also be subtracted from the exporters’ domestic emissions as well – but that is beyond the purpose of this blog.


Macrobond moment: It might seem daunting when you open up the above chart in Macrobond, but thanks to the easy-to-follow tree structure of the analysis you can easily improve on this graph yourself and work on it with your colleagues. Why not distribute the air and maritime transport emissions via GDP/capita keys or at least extend the history for some of the countries? If you are even more ambitious, why not add the export share of value added and calculate the carbon foot prints in tonnes and/or the “net exports” carbon footprint?


Indeed, when looking at a few select, rich, economies in the chart above, we can conclude that many of the countries increased the carbon factor – i.e., shifted “dirty” production abroad – up until the early 2000’s, when many countries finally came around to addressing the “imported” CO2 emissions. In this small sample of countries, it is worth noticing that the CO2 intensity of imports are about the same for both the US and the Euro Area. It is also frightening to see that the carbon-adjusted imports of a rich country like Japan is still 2½ times “carbon neutral” imports!

As far as Sweden is concerned, I must admit that it’s another win. Sweden’s imports are very close to carbon neutral and quite a lot better than that of other environmentally “woke” countries.

– Well done, compatriots!


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We don’t usually have views and opinions about economic and financial states of affairs, (not ones that we express publicly as a company, anyway). We do believe, however, that people can and do appreciate a variety of perspectives. What you’ve just read is the perspective of our resident chief economist. While we think he’s very smart, Macrobond Financial does not expressly endorse the views he presents here. And, as the old adage goes, you shouldn’t believe everything you read (not without finding the data, performing a few analyses and presenting it in a nice chart). We want to make it clear that we are not offering this information as investment advice. That being said, if you have the application you can easily check everything that’s mentioned here, and decide for yourself. If you don’t have the application, now you have a great reason to get it.