Diversified carbon intensity under global value chains: A measurement and decomposition analysis

Area of Science:

• Environmental Economics
• International Trade Analysis
• Climate Change Studies

Background:

• Global value chains (GVC) have fundamentally altered international trade dynamics.
• Understanding carbon emissions within GVCs is crucial for effective climate policy.
• Existing trade metrics often fail to capture the complexities of GVC-related carbon footprints.

Purpose of the Study:

• To develop a framework for measuring carbon intensities embodied in aggregated demand within GVCs.
• To differentiate carbon footprints across pure domestic demand, traditional trade, and various GVC routes (simple vs. complex).
• To identify and analyze the driving factors behind changes in embodied carbon intensities.

Main Methods:

• Utilized the Inter-country Input-Output (ICIO) model for a global analysis.
• Established a framework to measure carbon intensities embodied in aggregated demand.
• Employed multiplicative structural decomposition analysis (SDA) to identify driving factors.

Main Results:

• Developed countries exhibit higher carbon intensities in international trade compared to domestic demand; developing countries show the reverse.
• Traditional trade generally has lower carbon intensity than GVC routes.
• In low-carbon intensity groups, simple GVC routes have lower intensity than complex ones, and vice versa for high-intensity groups.

Conclusions:

• Emission coefficient effects are primary drivers of carbon intensity reduction, particularly within GVCs.
• Intermediate import effects act as inhibitors, increasing carbon intensity, especially in simple GVC routes compared to complex ones.
• Policy interventions should consider the distinct carbon implications of different trade structures within global value chains.