Dr Arunabha Ghosh is the CEO of the New Delhi-based think tank Council on Energy, Environment and Water and Professor Laurence Tubiana is the President and CEO of the European Climate Foundation
With nearly 200 signatories, the Paris Agreement remains the most comprehensive multilateral effort to mitigate the causes and address the effects of climate change. In November, at COP30, signatories will review their nationally determined contribution (NDC) climate plans for the third time.
Territorial emissions remain the core of countries’ commitments under the United Nations Framework Convention on Climate Change (UNFCCC). Countries decided that in the 1992 Rio Convention, based on jurisdiction over activities in their territory. However, the approach has a blind spot, which is that around 25% of global greenhouse gas (GHG) emissions are embedded in international trade.
G20 economies account for about 80% of these emissions. For Europe, the issue is particularly acute – the emissions imported by the EU are almost 40% of its overall GHG footprint, a conservative estimate that does not include emissions from deforestation.
Global dialogue on emissions in trade
That this issue has only recently entered the UNFCCC COP discussions reflects both its complexity and its growing significance in the context of global decarbonisation. A handful of UNFCCC members have begun acknowledging the importance of embedded GHG emissions in trade.
Illustrating this momentum, the last U.S. NDC even committed to “develop a new trade framework, built on accurate data on the emissions intensity of traded goods, that incentivizes reductions in industrial emissions across borders and supports the competitiveness of clean manufacturing.”
However, the debate has become largely tied to the concept of carbon leakage, usually for emission-intensive, trade-exposed, and politically sensitive industries, and to so-called “unilateral measures” to address this. Parties need to take a closer look at emissions embedded in trade, recognising the co-dependency that arises when one’s imports and consumption drive another’s production emissions.
Embedded emissions in the NDCs
Concretely, while embedded emissions—those associated with the production of traded goods—are not explicitly required under NDCs, countries could take several relevant steps. Parties are free to bring into their NDC any point of relevance related to their climate action, and this can include the evolution of their carbon footprint, including imported and exported emissions.
First, setting clear peaking or net-zero timelines within NDCs signals the expected emissions trajectory of a country, including those associated with its industrial base and traded goods. These announcements help trading partners and investors align expectations on the carbon intensity of supply chains.
Second, including economy-wide and sectoral targets allows countries to focus action where embedded emissions are most significant, such as heavy industry or energy-intensive supply chains. Sectoral targets offer policy clarity for industries, encourage early adopters of cleaner manufacturing processes, reduce the risk of greenwashing, and enable early decarbonisation and realignment of investment strategies in line with global climate goals.
Third, addressing the emissions intensity of traded products within NDCs can help reduce embedded emissions. Countries can include targets or strategies to lower the emissions associated with key imports and exports. This would mean setting standards for low-carbon production, promoting green exports, or incentivising cleaner supply chains. These must be tailored to diverse national contexts because pathways will vary.
A closer look at their carbon footprint could guide countries in their effort on climate finance. It could help bilateral conversations on dedicated support, regulatory or financial, to reduce embedded emissions. It could also lead to a multi-party effort, whenever several countries are sourcing the same carbon-intensive products from the same partners.
Fourth, targeting sequestration alongside mitigation can balance embedded emissions. By strengthening commitments to natural carbon sinks—through reforestation, soil carbon, or blue carbon initiatives—countries can offset the footprint of embedded emissions, especially in traded commodities where residual emissions are likely to remain despite aggressive mitigation efforts.
Finally, countries can include support measures for carbon accounting and traceability systems in their NDC implementation plans. Building such infrastructure helps industries track and reduce embedded emissions while enabling compliance with evolving global standards.
Moving together, aligning market signals
As mechanisms such as the Carbon Border Adjustment Mechanism (CBAM) gain prominence, there remain concerns about their unilateral origins, as well as around traceability, emissions classification, and trade fairness. For developing countries, where carbon accounting infrastructure is still evolving, companies may struggle to meet complex CBAM reporting requirements—especially within upstream and multi-tiered supply chains. These risks must be addressed through international support, capacity-building, and interoperable data frameworks.
At the same time, trade-related climate measures can play a positive role if designed well: supporting diversification of supply chains, enabling tariff reductions for mitigation technologies, and unlocking investments through linkages between carbon markets. In practice these opportunities remain limited. Ensuring procedural equity is equally important. Response measure assessments, notification systems to foster multilateral transparency, and differentiated obligations—such as exemptions or phased timelines for low-middle and low-income countries—can prevent unintended harms and support a just transition.
Moving forward, the global community must embed equity, flexibility, and development priorities at the core of trade-related climate action. Institutional coordination will be needed at a time when multilateral institutions are also being challenged. There is a real risk that emissions in trade will add another source of multilateral tension, unless there is a deliberate effort to design pathways toward a fairer, inclusive and more sustainable global economy. Doing so could in turn serve as another lever for more finance for net-zero production
