What role does global value chain participation play in emissions embodied in trade? New evidence from value-added trade

Abstract

The international division of the value chain brings both opportunities and challenges to developing countries. Integration into the global value chain (GVC) has become a new driving force for economic growth in developing countries while simultaneously creating huge pressures for the reduction of carbon emissions. The existing literature focuses on the measurement of GVC embeddedness and embodied emissions, but rarely on the influencing mechanisms between them. From the perspective of value-added trade, this study recalculates the emissions embodied in exports of developing countries using the multi-regional input-output model (MRIO), and analyzes the influencing mechanisms between the GVC and embodied emissions arising from four transmission paths: export scale, industrial structure, technological progress, and environmental regulation. The results show that there is an inverted U-shaped nonlinear relationship between the degree of GVC embeddedness and the carbon emissions of developing countries. Consequently, a low degree of participation in the GVC is not conducive to the improvement of a country's ecological environment; conversely, when GVC participation exceeds the inflection point, it helps to reduce the scale of embodied emissions. Export scale and industrial structure play important positive transmission roles in the impact of GVC embeddedness on carbon emissions embodied in exports, and developing countries are locked-in at the low end of the GVC. Environmental regulation plays a non-linear intermediary role in the relationship between GVC participation and carbon emissions, while technological progress has no significant impact. Thus, developing countries should actively participate in the GVC, while focusing on learning opportunities arising out of advanced low-carbon production technologies from developed countries, thereby benefiting from the technology spillover effect.