Trends and drivers of China's embodied carbon emissions in global value chains.

Abstract

Accurately measuring the embodied carbon emissions (ECE) in global value chains (GVCs) and identifying their key drivers is vital for formulating targeted mitigation policies in the context of GVCs. However, few studies have considered the effects of foreign direct investment (FDI)-related GVCs. To fill this gap, this study utilizes an inter-country input-output model and a decomposition framework for carbon emissions to measure the ECE in GVCs related to China during 2000-2018. It then quantifies the drivers of these emissions by distinguishing three GVC patterns (trade-related, FDI-related, and hybrid GVCs) using a structural decomposition analysis method incorporating GVCs. The key findings are as follows: (1) China has witnessed an increasing trend of carbon emissions originating from GVC production patterns, with FDI-related GVCs being particularly noteworthy. (2) China's ECE primarily originate from GVC production activities related to electricity, gas, water supply, construction, and other services. Medium- and high-tech manufacturing also contribute significantly to the growth of ECE. (3) The major drivers of China's ECE vary among the three GVC patterns. The increase in China's ECE in FDI-related GVCs was caused mainly by the growth in domestic final demand; conversely the decrease of the carbon emissions coefficient played a restraining role. These insights provide valuable perspectives for formulating policies that enable countries and industries to reduce their carbon emissions and support economic and environmental sustainability.