CO2 accounts for open economies: producer or consumer responsibility?

International negotiations of reducing CO2 emissions address the question of how to account annual CO2 emissions. For open economies like Denmark facing national CO2 targets import and export of commodities influence the total accounted CO2 emissions. In this article we demonstrate the consequences of using two basic accounting principles: a production versus a consumption principle. The distinction between the two principles is whether the producer or the consumer is responsible for the CO2 emitted. By subtracting total emissions based on the two accounting principles we develop the concept of a “CO2 trade balance”. Using Denmark as a case, we show that from 1989 to 1994 the CO2 trade balance has changed dramatically turning into a deficit of 7 million tonnes from a surplus of 0.5 million tonnes in 1987. Consequently, it has become more difficult to reach the national CO2 target as an increasing part of emissions from Danish territory is caused by foreign demand.