Trade Impacts on Embodied Carbon Emissions—Evidence from the Bilateral Trade between China and Germany

Abstract

This article attempts to investigate the impacts of bilateral trade on the environment by estimating the embodied carbon emissions between China and Germany over the period 1999–2018. The above impacts are broadly explored in the literature both under the framework of theoretical and empirical analysis. However, there exist fewer empirical studies exploring the nonlinear relationship between trade volumes and carbon emissions between a well-developed and emerging economies. By applying the multiregional input-output (MRIO) model, this article aims to reveal the impacts of trade on the environment in the case of China–Germany. Specifically, trade amounts between China and Germany rank high with a similarly increasing trend and both of them are large net exporting countries. However, China experienced much larger carbon emissions embodied in its exports to Germany. Despite potential concerns on the carbon leakage issue of China from Germany, we find that the bilateral trades fit an inverse U-shape in the embodied carbon emissions, which suggests that the trade between the two countries can finally reduce carbon intensity without obstructing economic development particularly in the long-term. This paper guides policy-makers to quantify the issue of CO2 transfer among bilateral trades in order to achieve the target of trading sustainability.

Heterogeneous Driving Factors of Carbon Emissions Embedded in China’s Export: An Application of the LASSO Model

“…Consequently, urbanization significantly increases the embodied carbon emissions in export. The findings are aligned with the observations of Li et al [ 9 ] and Ge et al [ 23 ].…”

“…Some other control variables are as follows: the dummy variables of China’s accession to the WTO (in the year 2001) and China’s proposal of the Belt and Road Initiative (in the year 2013). The two issues could stimulate international trade, and consequently, lead to the change of the embodied carbon emissions [ 9 ]. In addition, the exchange rate of RMB against the U.S. dollar is also included in the empirical models for the corresponding years.…”

“…First, this article calculates the direct carbon emission coefficients for 14 industries in China. According to the Intergovernmental Panel on Climate Change (IPCC) and the existing studies [ 9 ], eight major energy sources are extracted to form the carbon emissions. Afterwards, we can obtain the direct carbon emission coefficients matrix .…”

“…Carbon intensity is another crucial factor [ 15 ]. In addition, a couple of studies suggested that urbanization stimulates the demand for production and consumption [ 23 ], which lead to extra embodied carbon emissions in export [ 9 ]. On the contrary, a larger amount of R&D expenditures decline the emissions in trade [ 24 ].…”

“…On the other hand, this article verified that financial development reduced carbon emissions in Latin America and the Caribbean. Similarly, Li et al [ 9 ] discovered that the technological decline embodied carbon emissions in trade for China, but had no effect on the emissions of Germany. In addition, due to different production materials and consumer demand, factors affecting carbon emissions in different industries might be also heterogeneous [ 42 ].…”