Global value chains participation and trade-induced carbon inequality: A comparative analysis of developed and developing economies

Abstract

Trade-induced carbon transfer generates significant impacts on global carbon emissions, leading to carbon inequality (CI). This paper introduces a novel indirect metric, the trade-induced domestic carbon share (TDCS), designed to quantify economies' carbon benefits from international trade. Based on data from 17 manufacturing sectors in 66 major economies, this study compares the impact of developed and developing economies' participation in global value chains (GVCs) on TDCS, offering insights into trade-related carbon inequality. Our analysis reveals that GVCs participation by developed economies generally decrease their TDCS, in contrast to an increase in developing economies, thereby exacerbating carbon inequality. Notably, backward participation in GVCs reduces TDCS across all economies, whereas forward participation in GVCs results in increased TDCS in developing economies but a decrease in developed ones. Additionally, our study indicates that developed economies enhance their position in both forward and backward GVCs but experience a decline in the ratio of domestic value added (DVAR). In contrast, developing economies strengthen their forward GVCs position and DVAR but weaken their backward GVCs position. These findings offer new perspectives on carbon inequality in international trade and provide valuable guidance for policymakers in devising industrial trade and carbon reduction strategies.