Effects of digital global value chain participation on CO2 emissions embodied in digital exports: New evidence from PSTR approach

Abstract

The technological revolution and industrial transformation led by digital technology is driving the transformation of global value chains (GVCs) to digital GVCs. To address global climate change issues while achieving economic growth, many countries prioritize practical energy-saving and emission-reduction measures while obtaining higher trade gains through participation in digital GVCs and the international division of labor. Using panel data for 60 countries and regions from 2007 to 2019, this study first measures the degree of participation in digital GVCs and the CO2 emissions embodied in digital exports. A panel smooth transition regression model is used to explore how the level of digitalization affects the impact of digital GVC participation on CO2 emissions embodied in digital exports. The empirical results show that actively participating in digital GVCs can reduce CO2 emissions embodied in digital exports, and the effect varies depending on the participation approach. Specifically, the impact of forward participation in digital GVCs (FDGVCs) on CO2 emissions exhibits an inverted U shape, indicating that the emission-reduction effect gradually appears only when the digitalization exceeds a threshold. However, backward participation in digital GVCs (BDGVCs) significantly reduces CO2 emissions, although this contribution weakens as digitalization increases. Overall, the impact strength of FDGVCs and BDGVCs on emission reduction shows a growth trend throughout the period, and the impact of FDGVCs was less than that of BDGVCs. Heterogeneity analysis reveals that Organization for Economic Cooperation and Development (OECD) and non-OECD countries have different relationships between digital GVC participation and CO2 emissions embodied in digital exports. Furthermore, the positive impact of participation in digital GVCs is consistent with CO2 emissions generated by digital export intermediates and final products. For nondigital exports, FDGVCs can significantly reduce CO2 emissions if digitalization is high. Finally, countries should actively participate in digital GVCs to promote global economic growth and sustainable development.