Environmental Impact Of International Trade

The debate on international trade and environmental outcomes has raised a lot of concerns since North American Free Trade Agreement?NAFTA?came into effect in 1990s.At the same time,China's trade flows and emissions of main pollutants raise rapidly after China's accession into WTO in December 2001.So does trade liberalization lead to significant variations in China's pollution levels?What is the mechanism if international trade plays a determing role in environmental outcomes?How does international trade affect pollution for other economies in the world?There are still a lack of researches and discussions on the above issues in the literature.This thesis empirically studies the effect of international trade on environmental pollution and explores the mechanism.To do so,this thesis relies on two datasets from two main sources:the world input-output table data and China's environmental pollution data.First,based on Levinson's?2009?theoretical decomposition model,this thesis expands the one-country decomposition model to multi-country and multi-pollutant model and decomposes the effect of international trade on emissions into scale effect,composition effect and technique effect.Second,using China's city-level emissions dataset,this thesis examines how trade liberalization following China's accession into WTO affects emissions with difference-in-difference method from the perspective of composition effect.Finally,using China's firm-level emissions dataset,this thesis studies the effect of firms'decision to export on emissions and emission intensity with panel data models from the perspective of technique effect.There are there conclusions.First,based on the decomposition model,this thesis finds that scale effect is dominant for the emissions of carbon dioxide,sulfur oxides and nitrogen oxides are generally rising around the world.Both composition effect and technique effect contribute to a reduction of emissions,in which technique effect plays a main role in the cleanup of environment.However,the results of decomposition model are heterogeneous among different economies with various industrial structure.For economies with a dirtier-biased industrial structure,composition effect induced by the effect of international trade on emissions is more likely to induce an increase in emissions.For economies with a cleaner-biased industrial structure,composition effect induced by the effect of international trade on emissions is more likely to induce a reduction in emissions.Second,the exogenous shock of China's accession into WTO has different effects on various pollutants.The exogenous shock of China's accession into WTO does not have a significant impact on the water pollutant COD,but it decreases emissions of the air pollutant SO₂ significantly.The heterogeneous results are mainly due to the different influences of trade liberalization on different industries in China.Import tariffs have decreased sharply after China's accession into WTO.And import tariffs of light industry decreases more than heavy industry,leading export share of light industry increases and export becomes cleaner.Although export expansion increased emissions,a cleaner export structure offsets the increase in emssions from export expansion.Third,using China's firm-level data,decision to export is negatively and significantly related to emission intensity for COD,but has no significant effect on emission intensity for sulfur dioxide.This thesis also finds that exporting firms have significantly lower emissions than non-exporting firms for both polllutants COD and sulfur dioxide.From the micro perspective of enterprises,the productivity of exporting firms is higher,contributing to a reduction of emission intensity.Meanwhile,exporting firms can also reduce emissions through offshore outsourcing.Although the scale of exporting firms is higher,the effect of low emission intensity or offshore outsourcing decreasing emissions offsets the effect of scale increasing emissions.Therefore,emissions in exporting firms are lower.There are three innovations.First,this thesis enriches and supplements the existing literature for expanding the one-country decomposition research to the world and multi-country research.It also has more comprehensive conclusions for analysing the heterogeneous results of the world and different economies.Second,this thesis contributes to the existing literature with a new reaseach area of China's accession into WTO.It studies how trade liberalization following China's accession into WTO affects emissions.While the existing literature about China's accession into WTO studies how trade liberalization affects productivity,decision to export or markup.This thesis lays the foundation of further research in this new research field.Third,this thesis provides the empirical evidence in China's micro-firm level for the existing literature about international trade and environment.It examines the relationship between decision to export with emissions and emission intensity and also discusses the mechanism from the perspective of China's firms.This thesis first provides the research theme of international trade and environment from China's firm-level evidence and supplements the vacancy in the existing literature.This thesis has great meanings in both theory and reality.First,this thesis has important theoretical meanings for enriching and supplementing the existing literature.Second,this thesis has great practical meanings for revealing the mechanism how trade liberalization affects China's pollution and provides a scientific basis for trade policies and industrial policies.Third,this thesis provides a micro-mechanism how international trade affects environmental pollution,supplementing the existing literature.It also has an important implication and great meanings on innovation policies about clean technologies and environmental regulations.