GHG 101 – III What is a Carbon Negative Nation?

While most countries are trying for “net zero” status (the point at which their greenhouse gas emissions are balanced by removals), there are some that are currently carbon negative: they remove more carbon dioxide from the atmosphere than they emit.

Three nations have achieved this status: Bhutan, Suriname, and Panama.¹

Bhutan, the world’s first officially carbon-negative country, absorbs approximately six tonnes of carbon dioxide per capita through its vast forests, while emitting two tonnes per capita (the nation’s constitution mandates that at least 60 percent of its land remain forested “for all time,” a commitment it reaffirmed at COP15 in Copenhagen in 2009 and again at COP21 in 2016).²³ Suriname, the most forested country on Earth with 97 percent forest cover, absorbs roughly 8.8 million tons of carbon annually while emitting 7 million tons.⁴ Panama achieved carbon-negative status through a combination of bold energy sector transitions and conservation measures, with 65 percent of its territory covered in forest.⁵

But how do we know how much carbon they emit and how much they remove from the atmosphere? The answer is carbon accounting.

Carbon Accounting
Carbon accounting (also called greenhouse gas accounting) is the systematic method of measuring, recording, and reporting the greenhouse gas emissions generated by activities at the individual, organisational, or national level.

You can read more about it here, here, and also here (this is a technical post) in that order.

Understanding Carbon Negativity
In climate work, experts distinguish between production-based emissions and consumption-based emissions. This distinction can alter whether an entity appears to be carbon positive, neutral, or negative.⁶

• Production-based emissions represent what’s emitted physically within a country’s borders. This is the usual approach taken by national greenhouse gas inventories following UNFCCC (United Nations Framework Convention on Climate Change) guidelines. This accounting is relatively straightforward: it estimates emissions from all the oil, coal, and gas consumed within a country by private households, industrial production, and electricity generation.⁷
• Consumption-based emissions, are “all the greenhouse gas emissions needed, globally, to satisfy the final demand of residents of this country”. This approach acknowledges that occur in one location to produce goods and services consumed elsewhere.⁸

The standard formula for consumption-based emissions is:⁹¹⁰

Consumption-based emissions = Production-based emissions + emissions from imports − emissions from exports

Consider the implications: if the United Kingdom closes its domestic steel industry and begins importing steel from China, UK production-based emissions fall while Chinese production-based emissions rise. Yet from a consumption perspective, those emissions still relate to UK-based consumption—the steel is still being used in Britain, regardless of where it was produced.

The difference between these two accounting methods can be substantial. When accounting for emissions on a consumption basis rather than territorial (production) level, United States emissions increase by 10.9 percent,¹¹ while China’s emissions would decrease by substantially.¹¹ For large European economies, net imported emissions represent 20–50% of consumption emissions;¹¹ in Japan, they account for 17.8 percent, and in the United States, 10.8 percent.¹¹

Accounting methods matter: whether a nation appears carbon negative may depend not just on physical realities but on how boundaries are drawn, what emissions are counted, and how carbon sinks are calculated.

The Macroeconomic perspective
From a macroeconomic perspective, production-based emissions align with a nation’s Gross Domestic Product (GDP). The national income identity expresses GDP as:¹²

GDP = C + I + G + (X − M)

where:

• C = household (private) consumption
• I = investment
• G = government spending
• X = exports
• M = imports

Production‑based emissions follow the same logic as GDP: they count what is produced within a country’s borders, regardless of where those goods are ultimately consumed. In that sense, a country can run not only a financial trade surplus or deficit, but also a carbon trade surplus or deficit.

This concept is often framed through the Pollution Haven Hypothesis, which suggests that carbon-intensive production tends to migrate to jurisdictions with looser environmental regulations or lower energy costs (often developing nations), while cleaner, service-oriented economies (often developed nations) import the resulting goods.¹³

We can visualize this by mapping carbon flows against the standard macroeconomic identity for the trade balance (X – M):

• The Carbon Exporter (Trade Surplus X > M): Countries like China or Russia often function as the world’s “smokestacks.” They run trade surpluses in manufactured goods, meaning their Production-Based Emissions are significantly higher than their Consumption-Based Emissions. They are effectively exporting the “embodied carbon” of steel, cement, and electronics to the rest of the world.¹⁴
• The Carbon Importer (Trade Deficit X < M): Service-oriented economies like the UK or US often run trade deficits in goods. Their domestic factories are cleaner (or closed), lowering their territorial emissions. However, their consumption demands are met by imports, creating a “carbon trade deficit”: they consume far more emissions than they produce physically within their borders.¹⁵

This dynamic creates a “Carbon Loophole.” If the UK closes a steel mill to meet a “Net Zero” target but immediately starts importing steel from China, global atmospheric emissions haven’t changed—they have simply moved across a border. This leakage is the primary economic argument for policies like the European Union’s Carbon Border Adjustment Mechanism (CBAM), which attempts to tax the “embodied carbon” in imports, effectively reconciling the difference between production and consumption accounting at the border.¹⁶¹⁷

Consumption-Based Emissions
Consumption-based emissions take a fundamentally different approach. They represent “all the greenhouse gas emissions needed, globally, to satisfy the final demand of residents of this country”.¹¹

The standard formula for consumption-based emissions is:¹⁸

Consumption-based emissions = Production-based emissions + emissions from imports − emissions from exports

More specifically:

• Production-based emissions: what’s emitted within the country’s borders (the usual UNFCCC inventory)
• Emissions from imports: emissions that happened abroad while producing goods and services that residents import and consume
• Emissions from exports: emissions that happened domestically to produce goods that are consumed abroad; these are subtracted because they “belong” to foreign consumers in this method

Consumption-based accounting takes care of the problem that CO₂ emissions are mobile internationally through trade. A decrease in one country’s production-based emissions may be more or less directly related to an increase in another country’s emissions if production has simply shifted locations.¹⁹

Implications for Climate Policy and Carbon Negativity
The choice between production-based and consumption-based accounting has profound implications for assessing climate responsibility, setting reduction targets, and understanding whether a nation is truly carbon negative.

Consider again our carbon-negative exemplars: Bhutan, Suriname, and Panama. These countries achieve carbon-negative status through their vast forest cover, which acts as carbon sinks absorbing more CO₂ than their economies emit.

Using production-based accounting, these assessments are straightforward:

• Bhutan emits 2 tonnes CO₂ per capita while its forests absorb 6 tonnes per capita
• Suriname’s forests absorb 8.8 million tons annually while national production-based emissions are 7 million tons
• Panama’s forests and conservation reserves create net carbon sequestration exceeding territorial emissions

But what if we applied consumption-based accounting? These nations, like all countries, import goods and services that embody emissions from production elsewhere.

The question essentially is, while the nation is carbon negative, are its citizens?

This question reveals the complexity of carbon accounting at the national level. A nation might be a net carbon sink based on territorial emissions and removals, yet still contribute to global emissions through its consumption patterns. Conversely, a nation with high production-based emissions might argue that much of its emissions serve to produce goods consumed elsewhere.

Which Accounting Method Should Prevail?
There is ongoing debate among climate policy experts about whether consumption-based or production-based accounting should be the primary basis for climate policy.

Arguments for production-based accounting:

• It’s simpler to measure and verify
• It aligns with territorial sovereignty and national control
• Countries have direct policy leverage over production within their borders
• It’s the basis for UNFCCC inventories and the Paris Agreement commitments

Arguments for consumption-based accounting:

• It better reflects true climate responsibility
• It prevents “carbon leakage” where emissions are simply offshored
• It accounts for the full lifecycle of consumption patterns
• It can inform more comprehensive climate policies including consumption measures and border adjustments

In practice, most climate policy continues to be based on production-based accounting through UNFCCC inventories, but consumption-based approaches are increasingly used to complement this picture and inform policy discussions about trade, consumption, and global equity.

The Path Forward
For nations aspiring to carbon neutrality or carbon negativity, the journey requires:

1. Comprehensive measurement following standards like ISO 14064-1 to understand the full scope of emissions across all categories, including often-overlooked indirect emissions.
2. Clear baseline establishment with robust base year policies and recalculation procedures to enable meaningful tracking of progress over time.
3. Strategic mitigation through a combination of emissions reduction (shifting to renewable energy, improving efficiency, transforming industrial processes) and removal enhancement (protecting and expanding forests, implementing carbon capture, restoring degraded lands).
4. Project-level quantification using frameworks like ISO 14064-2 to measure the specific impact of mitigation initiatives, with conservative assumptions and comprehensive accounting of all affected sources, sinks, and reservoirs.
5. Independent verification following ISO 14064-3 to provide credible assurance to domestic and international stakeholders that reported emissions, removals, and reduction claims are accurate.
6. Transparent reporting that discloses methodologies, boundaries, assumptions, data sources, and uncertainties, enabling users to understand and evaluate climate claims.
7. Consistent application over time, with clear documentation of any methodological changes and appropriate recalculations to maintain comparability.

Carbon negativity represents a climate milestone that reflects a fundamental restructuring of an economy’s relationship with atmospheric carbon. Understanding how these countries achieve carbon negativity, helps us understand both, how climate responsibility is allocated in a globally interconnected economy, and what nations must do to achieve carbon negativity.