Determinants of net carbon emissions embodied in Sino-German trade

Abstract

Abstract The existing research on carbon emissions embodied in trade has been concentrated between net importing countries and net exporting countries. Few study has been conducted to analyze carbon emissions embodied in trade between net exporting countries. To fill the research gap, this work systematically investigated the net carbon emissions embodied in trade between the largest net exporter of developing countries (China) and the largest net exporter of developed countries (German) based on the non-competitive input-output analysis. And the structural decomposition analysis was used to study the driving factors effecting the change of net embodied carbon emissions in Sino-German trade. The results show the net carbon emissions embodied in Sino-German trade increased significantly with the sharp increase of net trade volume after China's accession to the World Trade Organization. Carbon transfer through trade was mainly concentrated in the carbon-intensive industrial sectors in Sino-German trade. This phenomenon was attributed to the differences in the trade structure and the production efficiency between China and Germany. The decomposition analysis shows China's intermediate input structure effect and the country structure effect of Germany's final demand were the leading contributors to growth in net carbon emission in Sino-German trade, which mainly was offset by China's carbon intensity effect. Finally, some policy implications are offered.