The Determinants of Greenhouse Gas Emissions Intensity in Global Value Chains1

Abstract

This paper tracks the greenhouse gas emissions intensity embedded in global value chains observing 186 countries from 1990 to 2015 and then looks at the determinants of emissions intensity considering both country and sector-level variables in a gravity-like framework. Our graphical visualization displays that as expectedly, developed countries appear to be both major GHG emissions producers and outsourcers in the highly fragmented world. Indeed, China, the USA, Germany, Japan, and Russia are the top five countries in terms of greenhouse gas emission intensities embedded in trade flows. Moreover, our empirical results reveal that while higher capital stock is attributable to higher greenhouse gas emissions intensity embedded in GVCs, the renewable energy consumption of sectors can be seen as an emissions intensity-decreasing factor. While higher income levels seems to deteriorate environmental quality, regional or global integration in trade agreements seems to be consistent with the current increasing efforts and concerns regarding environmental issues. Given the current trajectory and the findings of this article; encouraging renewable energy usage in the production process, monitoring detrimental trade and production activities, and cost-sharing plans between exporters and importers should be carefully considered to decrease GHG emissions intensities.