The carbon footprint of global trade: Assessing the impact of trade liberalization on the carbon emissions of Chinese listed companies

Abstract

AbstractThere is growing concern about the relationship between carbon emissions and trade liberalization. Have carbon emissions been affected by trade liberalization? To what extent has it been affected? To answer this question, we creatively constructed a dataset of Chinese listed companies and its re‐appraisal, using the difference‐in‐difference method to investigate the impact of trade liberalization on carbon emissions at the micro level. Our results show that WTO accession leads to lower carbon emission intensity for Chinese exporters engaged in general trade compared to those engaged in processing trade, which are not directly affected by China's WTO accession. In other words, trade liberalization is beneficial for the reduction of carbon emissions and sustainable development. We also test the robustness of our results. In addition, we decompose the question of how trade liberalization affects companies' carbon emissions into research and development mechanism and productivity mechanism for analysis. Our study refines the model of carbon emission and trade issues by incorporating company import indicators and carbon emission indicators into the company production model. It also has important policy implications. Green trade and reduce carbon emissions should be advocated when developing the economy through trade liberalization.