Revisiting the carbon-economic inequality within global value chain considering corporate heterogeneity: Evidence from China's trade

Abstract

The mismatch between trade-embodied economic benefits and CO2 emissions gives rise to inherent inequality within the era of global value chains (GVCs), whereas the existing accounting framework failed to distinguish between multinational corporations and local firms. Taking China as a case study, this study developed a novel Inter-country Input-output (ICIO) model based on the trade in factor income (TiFI) principle, while considering corporate heterogeneity. The findings reveal that when bilateral trades are measured in terms of trade in traditional value added (TiVA) principle, China's trade surplus with five partners was overestimated by 61 % from 2010 to 2015, with the United States being particularly overvalued by nearly 45 %. At the industry level, the Non-metallic manufacturing and Retail sectors accounted for over 10 % of China's exports, surpassing TiVA in terms of market share, indicating that China's contribution to crucial export sectors is underestimated. However, the evaluation based on the TiFI principle revealed a 27 % reduction in the overall carbon deficit, indicating that China's contribution to global carbon emissions continued to decline. The carbon-economic inequality (CEI) index between China and its trading partners indicates a value greater than or equal to 1, implying that China has encountered setbacks in global carbon trading. Notably, the application of the TiVA principle results in an underestimation of CEI between China-United States and China-South Korea, with respective values ranging from −0.13 to 0.27 and − 0.05 to 0.05. Overall, this study offers valuable scientific evidence towards addressing accountability and promoting climate justice.