Mapping carbon footprint along global value chains: A study based on firm heterogeneity in China

Abstract

The carbon footprint (CF) measures the carbon emissions not only within enterprises but also in upstream suppliers. As global production fragmentation becomes dominant, the generation and distribution of the CF have been profoundly changed. By building a multiregional input–output model that distinguishes firm ownership types, we analyse the CF of domestic-owned enterprises (DOEs) and foreign-owned enterprises (FOEs) in China from the global, host country and other countries’ perspectives and trace their CF along global value chains (GVCs) to the upstream regions and industries where the CF is generated. Our findings show that the CF per value added (VA) of DOEs fell faster than that of FOEs during 2005–2016. Most of the CF of FOEs is distributed in the energy-intensive industries of DOEs in the host country. When tracing the CF of FOEs beyond the host country, we find that for sectors that involve intense cross-border production activities, FOEs induce a higher percentage of CF abroad than DOEs, and the CF per VA of FOEs in developing countries is higher than that of DOEs. The policy implication for foreign direct investment host countries is to formulate strict emission restrictions for all kinds of enterprises, and for MNEs, it is to be aware of the emissions of their affiliates abroad. A new approach towards global climate governance that emphasizes the role of firms in building green GVCs is recommended.