Global Value Chain Linkages and Carbon Emissions embodied in trade, An Evidence from Emerging Economies: Uncovering Connections

TL;DR

This paper investigates how participation in global value chains by emerging economies from 1995 to 2018 influences carbon emissions embodied in trade, highlighting the environmental costs of economic integration.

Contribution

It provides empirical evidence linking GVC participation to increased carbon emissions in emerging economies, validating the Pollution Haven Hypothesis in this context.

Findings

GVC participation correlates with higher domestic CO2 emissions.

Foreign emissions in exports are linked to backward GVC participation.

All studied EMEs show continuous growth in carbon emissions.

Abstract

This study explores whether the Global Value Chain(GVC) participation of 16 emerging market economies (EMEs) from 1995 to 2018 in the manufacturing sector leads to a rise in carbon emissions embodied in trade. The study covers the ecological dimension of the Global Value Chain and validates the Pollution Haven Hypothesis in developing nations.To address the problem of cross-sectional dependence, autocorrelation, and heteroscedasticity panels, we estimate the above models using the feasible generalized least squares (FGLS) method. Our findings exhibit a continuous growth in carbon emissions of all the EMEs, there exists a positive association between GVC participation and domestic CO2 emissions embodied in gross exports. Also, EMEs' foreign carbon emissions embodied in gross exports directly correlate with backward GVC Participation, suggesting that the cleaner environment in developed countries comes at the expense of a dirtier environment in developing countries.