A trade-related CO2 emissions and its composition: Evidence from China

Abstract

Trade-related CO₂ emissions has been widely studied in existing research and them have mainly calculated the CO₂ emissions embodied in overall trade; however, China's domestic value chain (DVC) has developed rapidly, and different regions have different emissions effects due to different trade patterns. This study divides Chinese interregional trade into four trade patterns from the perspective of domestic production fragmentation. Then we develop a decomposition model of the interregional trade-related CO₂ emissions and pollution heaven hypothesis (PHH) of different trade patterns based on China's interregional input-output table for 2002 to 2010. Finally, we explore the influencing factors of the changes of environmental effects using structural decomposition analysis method. The results show that from 2002 to 2010, the volume of CO₂ emissions embodied in interregional trade increased significantly with the share of CO₂ emissions induced by traditional trade in intermediate products always representing a major proportion but which still underwent a downward trend. Interregional trade activities increase China's CO₂ emissions, and the PHH holds at the national level. Among them, trade in final products is conducive to reducing national CO₂ emissions while the other three patterns of interregional trade are opposite. In particular, the balance of avoided CO₂ emissions (BAC) in trade related to the DVC is positive, meaning that the DVC is polluting. In addition, domestic trade activities of the central region, northwestern region, and northern coast are not conducive to reducing regional and national CO₂ emissions while the southern coast and northeastern region are opposite.

Keywords: Input-output model; Interregional trade patterns; Pollution heaven hypothesis (PHH); Structural decomposition analysis (SDA); Trade-related CO2 emissions.