Carbon Emission Effect Of Trade Openness Impacting The Environment

The damage of the climate change to living environment of mankind is one of the grand challenges that human are confronted with. The carbon dioxide generated by burning fossil fuel such as coal, petroleum and natural gas is the primary reason causing the global warming. The statistics from International Energy Agency (IEA) showed that in China, carbon dioxide emissions increased rapidly from1.431billion tons in1979to7.259billion tons in2010. China has now become the largest CO2-emitting nation in the worlda. With the global warming becoming a highlight in the world’s economy and political relation, China’s increasing energy consumption and CO2emissions have aroused extensive attention from the world. China has become the focus in negotiation on international climate. For example, during the negotiation of the United Nations Framework Convention on Climate Change (UNFCCC), America and other developed countries claimed strongly that China and other developing countries should shoulder part of responsibilities of carbon emission reduction, which also became their excuse of refusing the approval of the "Kyoto Protocol". At the Copenhagen Climate Conference held in2009, America even proposed that the prerequisite of its carbon emission reduction was China’s promise of putting the carbon emission reduction into practice, which made China facing with great international pressure.Since reform and opening policy, especially after China’s entry into the WTO, China has now become the largest exporting country and the second largest trading country in the world. In2010, its total import and export value reached USD2972.76billion, and trade surplus USD183.1billion. The rapid growth of foreign trade greatly boost China’s economic development. China’s export products are mainly high energy consumption, high emissions and low value-added goods, while import products are mostly low energy consumption, low emissions and high added-value products. Due to the great difference between the structure of import and export products, China’s trade growth is at the cost of consumption of energy, resources and environmental pollution. The widely occupation of "made in China" products in the world market implies large quantities of C02emissions. On one hand,"China climate threat theory" holders accuse China of not bearing the obligations of greenhouse gas emission reduction; on the other hand, they consume plenty of cheap products which are made in China. Therefore, with the climate change and environmental pressure both at home and abroad getting increasingly severe, this paper conducted study on carbon emission effect of China’s foreign trade impacting the environment and its mechanism, quantitative examination of impact of trade openness on China’s CO2emissions, coordination of the relation between trade openness and carbon emissions, with the purpose of facilitating sustainable development of both China’s trade openness and environment.This paper adopt Copeland and Taylor’s general equilibrium model of supply-demand of environmental pollution(2003) to analyze effect of carbon emissions. The author then developed theoretical model of carbon emissions from the perspectives of international division of labor, global production network and foreign direct investment. With the data from30provinces (city, area) during1998-2010, this paper applied dynamic and static panel data models to examine overall and regional effects of trade openness in nationwide, eastern, middle and western China on carbon emissions. Meanwhile, in order to analyze the carbon emission problems caused directly by trade openness, this paper conducted the following studies:to estimate CO2factors of China’s industries during2001-2010on basis of environmental input-output model; to measure the carbon content of Chinese trade in this period; adopting the carbon content index of net trade to test the carbon balance of China’s foreign trade. Afterwards, this paper analyzed the import and export carbon content of industries and the flow of China’s trade carbon content.This paper includes the following contents:(1)According to the relationship between environmental externality and international trade, applying the partial equilibrium method to analyze the impact of trade openness on the environment. This paper argues that international trade though is not the fundamental cause of environmental problems, but may worsen them. From the results of static analysis, the writer could conclude that if the externality of environment is not controlled, the welfare effect of trade liberalization is uncertain. However, if most of the externality of the environment is internalized by appropriate environmental policies, the impacts of trade liberalization and environment on the welfare are positive in general.(2)By applying the general equilibrium model of supply-demand of environmental pollution established by Copeland and Taylor (2003) to the analysis on effect of carbon emission. Then to develop theoretical model of carbon emissions from the perspectives of international division of labor, global production network and foreign direct investment. This analysis shows that the effect of trade openness on carbon emissions can be realized through scale effect, structure effect, global production network effect, technique effect and regulation effect, etc.(3)The empirical analysis based on time series suggests that trade openness increases China’s overall CO2emissions. During the study period, the degrees of foreign trade dependence and foreign capital dependence are the Granger reason that caused changes of CO2emissions in China. The impulse response function analysis based on the VAR model shows that the shock response accumulative values of foreign trade dependence and foreign capital dependence are both positive, with foreign trade dependence having far greater influence than foreign capital dependence. Variance decomposition analysis shows that, the variance decomposition contributions of foreign trade dependence and foreign capital dependence on CO2emissions are both incremental, with FDI having less impact on carbon emissions than foreign trade.(4)The empirical analysis based on data model of national dynamic panel demonstrates that the relationship between per capita GDP and CO2emissions is an inverted U-shape, therefore the CKC hypothesis is valid. The scale of foreign trade has positive effect on CO2emissions, i. e. the expansion of China’s foreign trade having a negative impact on environment. Structure effect has increased China’s CO2emissions. The technological development caused by independent R&D has a significant control on the reduction of CO2emissions. Because of FDI’s technology spillover effect, the increase of FDI has reduced partly China’s stress on CO2emissions. Government regulations did not achieve the expected purposes. The global product network effect is positive but not obvious, which means that because China is still at the end of the value chain in the global product network, having the characteristics with cheap labor, land and sources, low value-added products, and great consumption of energy, so when comparing with other factors, carbon emission effect of the global product network is not obvious.The analysis based on regional static panel data model could illustrate that the per capita GDP curve and carbon emission curve show different shapes. In eastern and middle China, the relationship between per capita GDP and CO2is an inverted U-shape, therefore CKC hypothesis is valid. In western China, however, the curve is U-shaped, so CKC hypothesis is invalid. The correlations between carbon emissions and regional scale effect, or structure effect, or government regulations are different from the carbon emission effect of the global product network, but the R&D in different areas and the FDI have the same effect on carbon emissions.(5)The analysis based on the environmental input-output model of trade of Chinese industries shows that during the study years, the average annual increase of China’s export carbon content is7.92%. The proportion of export carbon content in carbon emissions of industrial sectors as a whole is10%in most years. The proportion of import carbon content in the overall industrial sectors decreased from5.07%in2001to1.99%in2010. The carbon content of China’s net trade has been keeping in surplus state. The industries with the highest net trade carbon content are chemical industry, textiles, clothing, footwear, leather, down and its products and communication equipment, computers and other electronic equipment manufacturing, etc. The causes of change of China’s net trade carbon content are scales of import and export trade and carbon emission factors. During2001-2010, the export trade carbon content of China’s ten largest trading partners increased from232.2387million tons to410.6507million tons. During this period, the United States was the biggest recipient of China’s export goods carbon content, with the industrial export carbon content amounting to785.5048million tons in ten years. China’s total industrial export carbon content to the EU was once less than that to the United States. But in2007, the EU surpassed America and became the biggest recipient of China’s carbon content. Other important recipients were Hong Kong, ASEAN and Japan. Import trade carbon content of China’s ten largest trading partners decreased from76.5357million tons to66.9740million tons. During2001-2007, because Japan was the main source of China’s import goods, China’s import product carbon content from Japan took the first place. After2008, China’s import goods carbon content from the EU exceeded that from Japan, and China’s import goods carbon content from ASEAN, South Korea, the United States and Taiwan accounted more than7%of the total in most years.Finally, according to the above theoretical analyses and empirical analyses, this paper put forward corresponding countermeasures about methods to coordinate the relation between China’s trade openness and carbon emissions with the purpose of implementing low-carbon trade.