The asymmetric effect of global value chain on environmental quality: Implications for environmental management

Abstract

This study examines the dynamic relationship between global value chain integration, and carbon emissions, in 57 developing economies from 2000 to 2018. Our results show a multipart link between GVC involvement and carbon emissions. Specifically, forward participation, which involves domestic content in foreign exports, offers the potential to reduce emissions, whereas backward participation, defined by foreign content in domestic exports, typically increases emissions. This imbalance draws attention to the dual nature of using mineral resources, which can contribute to and mitigate environmental damage depending on the extent of GVC engagement. The NARDL model employed in the study also reveals the dynamic and nonlinear responses of carbon emissions to variations in the utilization of mineral resources within GVCs. Our findings show that positive shocks to mineral resources use within GVCs negatively influence carbon emissions, while adverse shocks have less impact. The results have significant policy implications, indicating that developing nations should prioritize environmental sustainability while planning their GVC participation. This entails promoting value-added mining resource use initiatives and pushing for strict environmental regulations in GVCs. Our results also highlight the significance of implementing customized measures to mitigate economic activity's asymmetric and nonlinear impacts on environmental quality. It enlightens policymakers in developing nations on balancing environmental conservation and economic growth in a global economy that is becoming more interconnected.