Tracing CO2 emissions in global value chains

This paper integrates two lines of research into a unified conceptual framework: trade in global value chains and embodied emissions. This allows both value added and emissions to be systematically traced at the country, sector, and bilateral levels through various production network routes. By combining value-added and emissions accounting in a consistent way, the potential environmental cost (amount of emissions per unit of value added) along global value chains can be estimated. Using this unified accounting method, we trace CO2 emissions in the global production and trade network among 41 economies in 35 sectors from 1995 to 2009, basing our calculations on the World Input–Output Database, and show how they help us to better understand the impact of cross-country production sharing on the environment.

Production fragmentation, upstreamness, and value-added : evidence from factory Asia 1990-2005

We exploit the recent release of the 2005 Asian Input-Output Matrix to dress a picture of the geographic fragmentation of value added in Factory Asia from 1990 to 2005. We document 3 stylized facts. The first is that the average share of foreign value added embedded in production rose by about 7 percentage points between 1990 and 2005, from 9% to 16%. The second is that, contrary to popular belief, China's production embeds a smaller share of foreign value added than other Factory Asia countries'. Between 1990 and 2005 among Factory Asia countries China grew most after Japan as a source of value added to other countries' production. Third, country-industries at the upstream and downstream extremities of the supply chain embed a smaller share of foreign value added than those with intermediate levels of upstreamness.

Consumption-based accounting of U.S. CO2 emissions from 1990 to 2010

To tackle global climate change, it is desirable to reduce CO2 emissions associated with household consumption in particular in developed countries, which tend to have much higher per capita household carbon footprints than less developed countries. Our results show that carbon intensity of different consumption categories in the U.S. varies significantly. The carbon footprint tends to increase with increasing income but at a decreasing rate due to additional income being spent on less carbon intensive consumption items. This general tendency is frequently compensated by higher frequency of international trips and higher housing related carbon emissions (larger houses and more space for consumption items). Our results also show that more than 30% of CO2 emissions associated with household consumption in the U.S. occur outside of the U.S. Given these facts, the design of carbon mitigation policies should take changing household consumption patterns and international trade into account.

Undermined climate policies : a study on the impact of regulatory and financial discrimination across heterogeneous firms in China

Firms in China within the same industry but with different ownership and size have very different production functions and can face very different emission regulations and financial conditions. This fact has largely been ignored in most of the existing literature on climate change. Using a newly augmented Chinese input–output table in which information about firm size and ownership are explicitly reported, this paper employs a dynamic computable general equilibrium (CGE) model to analyze the impact of alternative climate policy designs with respect to regulation and financial conditions on heterogeneous firms. The simulation results indicate that with a business-as-usual regulatory structure, the effectiveness and economic efficiency of climate policies is significantly undermined. Expanding regulation to cover additional firms has a first-order effect of improving efficiency. However, over-investment in energy technologies in certain firms may decrease the overall efficiency of investments and dampen long-term economic growth by competing with other fixed-capital investments for financial resources. Therefore, a market-oriented arrangement for sharing emission reduction burden and a mechanism for allocating green investment is crucial for China to achieve a more ambitious emission target in the long run.