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Measuring emissions avoided by international trade: Accounting for price differences


Net Emissions Avoided by trade (NEA) are the difference between the pollution that would have been produced
in a country if it had not exported any products and all the imports required to satisfy its domestic demand had
been produced internally, and its actual emissions. The Domestic Technology Assumption (DTA) applied to an
Input–Output model is the appropriate method to estimate the NEA. The usual implementation of the DTA involves
that the country analyzed should produce a quantity of products equivalent to the monetary value of
the imports required to satisfy its final demand (i.e. ‘monetary DTA’). However, due to price differences, the
same physical quantity of goods in different countries could have a different monetary value and the estimation
of the NEAwould be biased.We show that a ‘physical DTA’, focused on the pollution to produce domestically the
importsmeasured in physical units, would be a better approach.We have applied both methodologies to analyze
greenhouse gas emissions in Spain 1995–2007. Both methodologies show that Spain is avoiding emissions
through trade. However, the NEA increases up to three times when applying the ‘physical DTA’, showing that results
from the ‘monetary DTA’ are biased by price differences.