Decomposing the carbon footprints of multinational enterprises along global value chains

Abstract

Significant environmental impacts of multinational enterprises (MNEs) are beyond firms and countries because of their cross-border production-sharing activities. In this paper, we trace MNEs’ carbon footprints (CFs) to the upstream along global value chains (GVCs) and analyze the driving factors that lead to changes in MNEs’ CFs through hierarchical structural decomposition analysis. Our findings show that the distribution of MNEs’ CFs is highly consistent with the distribution of their GVC production networks, where these CFs are mainly concentrated in advanced economies, and emerging markets and developing economies only account for a small but gradually increasing share. Further, MNEs’ CFs are mainly attributed to medium high/high-tech manufacturing, especially in emerging markets and developing economies, where over one-half of these firms’ CFs are generated in computer, electronics and optical products and motor vehicle production. Finally, we analyze the different impacts of changes in the emissions of domestic-owned enterprises, foreign-invested enterprises in host countries and emissions generated abroad on MNEs’ CFs as well as the main driving factors leading to these changes in the US, Germany, China, India, Mexico and Singapore. Our findings provide support for MNEs’ whole global-value-chain emission control to realize global carbon neutrality and shed light on possible pathways for mitigating the domestic carbon emissions of economies that are deeply integrated into GVCs.