Will the imposition of carbon tariffs enhance or worsen the carbon performance of China's export industries? A reality check based on 28 manufacturing industry segments.

Abstract

Carbon tariffs are directly linked to carbon performance and have an impact on export sectors. This paper examines the relationship between carbon tariffs and carbon performance based on China's manufacturing sector, helping to visually quantify the impact of carbon tariffs and to adopt more favourable strategies to address the impact. This paper uses data from 28 manufacturing industry segments in China from 2009 to 2019, estimating carbon performance using an SBM model incorporating non-desired outputs. The panel Tobit model is also used to explore the driving role of carbon tariffs and related variables on carbon performance. The results show the following: First of all, China's manufacturing carbon performance is generally on an upward trend but is mainly driven by improvements in the light textile and machinery manufacturing industries. Secondly, in terms of drivers of carbon performance, the imposition of carbon tariffs will increase the carbon performance of China's manufacturing sector. Furthermore, R&D investment is positively correlated with carbon emission performance. The significant positive impact of export dependence is manifested in the light and textile industry. Energy intensity has a significant positive impact on the textile industry and a significant negative impact on the resource processing industry. Environmental regulations have a negative impact on the light textile industry. China should optimize the industrial chain of resource processing industry. At the same time, China should increase R&D investment in emission reduction and product upgrades, encourage the export of light and textile industrial products, increase the import of resource processing industrial products. Also, the government should formulate environmental regulatory policies that are close to the nature of the industry.