An emergy and decomposition assessment of China-Japan trade: Driving forces and environmental imbalance

With the robust development of economic globalization, international trade should be fairly conducted in order to strengthen the relations among different nations. Currently, due to different resource endowments and trade policies, different nations face different resources and environmental challenges. Previous studies suggested that even when trade seems balanced in monetary terms, it may be unequal in terms of resources exchanges due to different purchasing power of national currencies. As such, imbalance also exist in terms of environmental quality of traded resources and related environmental costs and emissions, such as embodied energy, water, land, carbon, ecosystem services. Under such circumstances, it is necessary and urgent to identify environmental imbalance of international trade and seek appropriate tools so that more balanced and fairer trade among nations can be implemented. This study investigates the quality of resource flows exchanged between China and Japan during the period 2000–2012. Emergy accounting, a well-established environmental accounting method, is used in this study to quantify the environmental work (past and present ecosystem services) embodied in traded resources. Within a broader emergy-based bio-physical perspective, a Logarithmic Mean Divisia Index (LMDI) decomposition approach is applied to identify the driving forces that affect the evolution of import-export resources balance in the investigated period. LMDI decomposes the driving forces into three factors: (a) scale factor, which depends on the total export volume; (b) technology factor, which depends on the emergy intensity of trade (emergy of traded resources); and (c) structural factor, which depends on the trade structure (mix of exchanged commodities). Results show that China was a net emergy exporter in the years 2000 and 2005, with figures of 7.46E+22 sej/yr and 5.76E+21 sej/yr, respectively, but was a net importer in the years 2008 and 2012, with imported emergy figures of 8.82E+22 sej/yr and 2.43E+23 sej/yr, respectively. Scale and technology factors are the most significant drivers to promote China-Japan trade from an emergy point of view (i.e. from the point of view of environmental quality assessment), while the influence of structural factor was relatively marginal. Trade imbalance and lack of focus on environmental value of resources cannot be the basis for stable economic relations with partner countries, which calls for compensation measures in money or resource terms. This study, by investigating the sustainability of China-Japan international trade, also suggests a methodological approach to increase worldwide trade stability and fairness.