Carbon without borders: How US demand fuels global emissions (and what it means for Australia)

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As Australian businesses deepen their participation in complex global supply chains, one truth becomes increasingly clear: consumption is not confined by geography. The environmental impact of what households buy in one country often reverberates across oceans, industries, and economies.

Recent research offers a groundbreaking perspective on this issue. By analysing environmentally extended input-output data (EORA-26, spanning 1990–2021), the study reveals how US household consumption – within one of the world’s largest economies and Australia’s key trading partner – drives greenhouse gas (GHG) emissions far beyond American borders.

The findings are sobering: emissions are not only redistributed between industries but increasingly outsourced internationally, raising profound questions about climate accountability and supply chain sustainability.

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The rising tide of consumption-based emissions

The United States has long been a heavyweight in global emissions, historically responsible for around 25% of the world’s total emissions up to the early 2020s. While domestic (territorial) emissions fell below 1990 levels by 2021, consumption-driven emissions, especially those tied to household demand, remain stubbornly higher.

• By 2007, US household consumption alone generated 5.6 gigatonnes (Gt) of emissions, representing a quarter of global household emissions.
• This divergence between territorial and consumption-based emissions highlights the scale of international leakage, where emissions are effectively “outsourced” to other countries.

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The critical role of international leakage

The study identifies a striking trend: US household demand increasingly transfers embodied emissions to its trading partners.

• Inter-industry leakage (measured through Spillover & Feedback effects, or S&F) accounts for over 45% of emissions linked to US household demand.
• The overseas share of these S&F effects has surged:
  • In 1990, foreign supply contributed less than 25% of domestic S&F emissions.
  • By 2021, foreign supply had ballooned to 68% of domestic S&F emissions.

This shift is largely driven by surging US demand for imports from developing nations, which grew 476% between 1990 and 2021, compared to 342% growth in domestic supply..

Strategic implications for Australian business leaders

This research highlights the need for Australian businesses to move beyond traditional territorial carbon accounting and embrace a global lens on climate risk.

1. Climate equity and risk management
The outsourcing of emissions to developing nations, many of which lack the resources to mitigate them, raises urgent questions of fairness and accountability. Australian businesses with suppliers in these regions must recognise that while emissions are driven by end-user demand (like US households), the burden of mitigation is unfairly shifted.

2. Dual action: Demand-side + Producer-side
Reducing consumption alone is insufficient. A holistic strategy requires both moderation in consuming nations and cleaner production in exporting nations. For Australian leaders, this means:

• Prioritise low-intensity suppliers: Favor imports from countries actively reducing emission intensity.
• Support clean technology transfer: Advocate for and invest in technology adoption and climate finance in developing economies.