Upgrading or downgrading: China's regional carbon emission intensity evolution and its determinants

Abstract

One of China's major national targets is to environmentally upgrade its economy. In this paper, we define environmental upgrading as lowering the carbon intensity. The disparities among China's regions suggest to examine China's carbon emission performance at the regional level. For this purpose, we use inter-regional input-output tables (for 2002, 2007, and 2012) that distinguish processing exports from ordinary exports. The regional emission intensities (EIs) show environmental downgrading in the period 2002–2007 and upgrading during 2007–2012. To identify the determinants of the evolution of regional EIs, we have employed a multiplicative structural decomposition analysis. Changes in direct emission coefficients and changes in production technology are found to be the major determinants. However, next to these standard determinants, we also evaluate the effects on the changes in regional EIs of changes in inter-regional trade and changes in inter-regional spillovers. Changing inter-regional trade is found to have increased the EI significantly in western and central regions. This suggests that more “dirty” production was shifted from coastal to inland regions. Our study yields clear policy recommendations for achieving China's transformation to a low-carbon economy. • China's regional carbon emission performance experienced “downgrading” first and then “upgrading” during 2002–2012. • There are large regional disparities in the emission intensity (EI) evolution. • China's inter-regional input-output tables that distinguish processing exports are adopted. • Multiplicative structural decomposition analysis (SDA) is used to identify the determinants of China's regional EI changes. • Shifts of “dirty” production from coastal to inland regions have increased the EIs in inland regions.