A unified framework of trade in value added : physical, monetary, exchange rates, and GHG emissions

Koopman et al. (2014) developed a method to consistently decompose gross exports in value-added terms that accommodate infinite repercussions of international and inter-sector transactions. This provides a better understanding of trade in value added in global value chains than does the conventional gross exports method, which is affected by double-counting problems. However, the new framework is based on monetary input--output (IO) tables and cannot distinguish prices from quantities; thus, it is unable to consider financial adjustments through the exchange market. In this paper, we propose a framework based on a physical IO system, characterized by its linear programming equivalent that can clarify the various complexities relevant to the existing indicators and is proved to be consistent with Koopman's results when the physical decompositions are evaluated in monetary terms. While international monetary tables are typically described in current U.S. dollars, the physical framework can elucidate the impact of price adjustments through the exchange market. An iterative procedure to calculate the exchange rates is proposed, and we also show that the physical framework is also convenient for considering indicators associated with greenhouse gas (GHG) emissions.

China's inter-regional spillover of carbon emissions and domestic supply chains

In this study, we apply the inter-regional input–output model to explain the relationship between China’s inter-regional spillover of CO2 emissions and domestic supply chains for 2002 and 2007. Based on this model, we propose alternative indicators such as the trade in CO2 emissions, CO2 emissions in trade, regional trade balances, and comparative advantage of CO2 emissions. The empirical results not only reveal the nature and significance of inter-regional environmental spillover within China’s domestic regions but also demonstrate how CO2 emissions are created and distributed across regions via domestic production networks. The main finding shows that a region’s CO2 emissions depend on not only its intra-regional production technique, energy use efficiency but also its position and participation degree in domestic and global supply chains.

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 sharing, demand spillovers and CO2 emissions : the case of Chinese regions in GVCs

This study adopts the perspective of demand spillovers to provide new insights regarding Chinese domestic-regions' production position in global value chains and their associated CO2 emissions. To this end, we constructed a new type of World Input-Output Database in which China's domestic interregional input-output table for 2007 is endogenously embedded. Then, the pattern of China's regional demand spillovers across both domestic regions and countries are revealed by employing this new database. These results were further connected to endowments theory, which help to make sense of the empirical results. It is found that China's regions locate relatively upstream in GVCs, and had CO2 emissions in net exports, which were entirely predicted by the environmental extended HOV model. Our study points to micro policy instruments to combat climate change, for example, the tax reform for energy inputs that helps to change the production pattern thus has impact on trade pattern and so forth.

How does firm heterogeneity information impact the estimation of embodied carbon emissions in Chinese exports?

Using an augmented Chinese input–output table in which information about firm ownership and type of traded goods are explicitly reported, we show that ignoring firm heterogeneity causes embodied CO2 emissions in Chinese exports to be overestimated by 20% at the national level, with huge differences at the sector level, for 2007. This is because different types of firm that are allocated to the same sector of the conventional Chinese input–output table vary greatly in terms of market share, production technology and carbon intensity. This overestimation of export-related carbon emissions would be even higher if it were not for the fact that 80% of CO2 emissions embodied in exports of foreign-owned firms are, in fact, emitted by Chinese-owned firms upstream of the supply chain. The main reason is that the largest CO2 emitter, the electricity sector located upstream in Chinese domestic supply chains, is strongly dominated by Chinese-owned firms with very high carbon intensity.

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.