Participation in GVCs and CO2 emissions

Abstract

This paper attempts to explore the determinants of CO2 emissions in the context of international trade. While there exist studies that examine the roles of horizontal specialization and inter-industry trade transactions, little previous research attention has been paid to the roles of vertical specialization and intra-industry trade transactions in affecting CO2 emissions. To fill the knowledge gap, this study uses the panel data of 62 countries and regions for the period of 1995–2011 to estimate the effect of participation in global value chains (GVCs) on per capita CO2 emissions. Major findings include: (1) The relationship between participation degrees in GVCs and per capita CO2 emissions is found to be inversely U-shaped at the aggregate economy-level and for most individual industries; (2) Per capita GDP shows an N-shaped relationship with per capita CO2 emissions; and (3) Benign drivers of CO2 emissions include R&D, energy conservation, and population control. It can be concluded that countries with low GDP or GVC participation degrees are expected to experience worsening CO2 emissions in the short or even medium run. This trend, however, can be moderated or even reversed with more R&D investments.