An Jiang

                                                                                                   School of Finance and Trade

Abstract: The 17th contracting party conference for UNFCCC (United Nations Framework Convention on Climate Change) was held in Durban, South Africa, during November 28th-December 9th, 2011. The Durban Conference confirmed to promote the second commitment period of the Kyoto Protocol and launch the" Green Climate Fund’. Following the Kyoto Protocol, it is an epoch-making significant agreement of the global climate, which implies the establishment of the international mechanism for carbon emission reduction in the Post-Kyoto-Protocol era. Facing with the severe environmental deterioration caused by the global warming, the low-carbon economy is increasingly becoming the common development mode of the whole world, which will have a profound impact on human production and life. However, low-carbon economy is not only a severe challenge, but also a rare opportunity for the development of China. Since the reform and opening up, China is in the process of the rapid progress of industrialization, which caused a significant increase of energy consumption and the trend of rapid growth of carbon dioxide emissions. According to statistics, there is a sharp rise of China's carbon dioxide emissions in recent years. Furthermore, China has surpassed the U.S. and became the world's largest producers of carbon emissions in 2006. Thus, it is urgent for China to develop the low-carbon economy. Particularly, the continuous expansion of China’s export trade, as one of the important driving forces of China's economic growth, is increasingly exacerbating the pollution of carbon dioxide emissions in China, which caused strong concerns of governments, academics and even the public both at home and abroad. Therefore, this paper has chosen the impact of low-carbon economy on the development of China's export trade as the entry point. What is the influence of low-carbon economy on the scale and pattern of China's export trade? What conditions will be the changes of embodied carbon emissions of China's export trade? How could we analyze the impact of low-carbon economy on the export trade of various industries in China by using the scale effect, structural effect and technical effect? In what way will the regulations of low-carbon emission reduction affect the international competitiveness of China's export trade? Faced with the serious challenge of low-carbon economy, how could China's export trade achieve the low-carbon development in the future? These problems will be the focus in this paper.

With the methodology of theoretical and empirical analysis, this paper, on the one hand, gives the analysis on the situations and determinants of the carbon emissions of China’s export trade as well as the reasons on the influence of the regulation of low-carbon emission reduction on the export trade of China, thereby providing theory and data support for China's exports of low-carbon development. On the other hand, with the help of the Johansen cointegration analysis, Granger causality test and VAR model analysis, this paper makes the research on the relationship and the long-term effects between the total carbon emissions and the scale and patterns of China's export trade. Thereafter, it makes good use of input-output model to estimate the quantities and changes of embodied carbon emissions of the export trade of various industries in China. Furthermore, it makes the analysis of the different impacts on China’s export trade of various industries caused by the scale effects, structural effects and technical effect of low carbon economy with the help of LMDI factor decomposition method. On this basis, this paper takes the carbon tariffs on behalf of the regulation of low-carbon emission reduction to study its specific impacts on the international competitiveness of Chinese industry exports. Based on the above theoretical and empirical research, this paper proposes countermeasures of low-carbon development and workable policy recommendations suitable for China's export trade.

The main conclusions of this paper are as follows:

(1) From 1978 to 2010, there is the existence of long-run equilibrium and short-term fluctuations in the relationship between China's carbon emissions and the scale of its total export trade, which indicates that the increase of carbon emissions is the Granger cause of the expansion of export trade. Similarly, during the same period, there exists the long-run equilibrium and short-term fluctuations in the correlation between China’s carbon emissions and its export trade patterns, which shows that the growth of China's carbon emissions is the Granger because of its general and processing trade patterns. Consequently, this paper shows that China's low value-added extensive, high-carbon development model is the main driving force of the expansion of the scale of China's total export trade and the growth of its export trade patterns, which not only proves that there exists the "non-environmentally friendly” feature in the scale and patterns of the export trade of China, but also confirms that the heavy pressure would be brought by the high trade surplus and the rapid growth of China's export trade to the low-carbon emission reduction of China.

(2) With the help of China’s input-output sequence tables based on comparable prices from 1992 to 2007, this paper makes the calculation of the embodied carbon emissions and its changes of China’s 30 industry exports by using the Walras-Kassel model and the input-output method. This paper shows that the complete carbon producing coefficients (also known as “carbon emission coefficients”) of various industries as a whole have decreased after China's accession to the WTO. This trend is quite consistent with the restructuring and upgrading of China’s industries as well as the implementation of China’s energy conservation policy, which proves that there are some achievements in China’s development of low-carbon economy. However, China's industrial structure characteristics is still the labor-intensive, resource-based and energy-intensive pollution emissions become very serious, which proves that the overall technology is lagging behind, so that China is still dependent on the high input, high energy consumption of the extensive development mode. Although there is the rapid growth of China’s export trade after its accession to the WTO, China's export products are mostly high-energy, high emissions of primary products. As a result, there has been a substantial increase in the embodied carbon emissions of China's export trade, thus bearing a lot of carbon emissions for many other countries. Therefore, it is urgent for China to promote the transformation and upgrading of the export trade, while it is desperately needed for China to develop and introduce the advanced energy conservation technology as well as make and produce many low-carbon high-quality goods and services, thereby establishing a responsible large country image of China and making great contribution to the international carbon emission reduction.

(3) Through studying the ideology of Copeland & Taylor (2003), this paper establishes a general equilibrium theory model about low-carbon economy and trade to resolve the impacts of scale effects, structural effects and technical effect caused by the low-carbon economy on the international trade. Furthermore, on the basis of embodied carbon emissions of the export trade of China’s 30 industries, the paper makes an empirical analysis of the above three effects of embodied carbon emissions of China’s exports from 1992 to 2007 with the methodology of index decomposition method (Log Mean Divisia index), namely the LMDI factor decomposition method. The findings show that, during this period, observed from the direction of the impact of the three effects, the scale effect, the structural effect and the total effect of changes are in the same direction, which means that the scale effect and the structural effect are playing a "positive" role in the “growth of carbon emission”. By contrast, the technical effects are in the opposite direction to the total effect of changes, which implies that the technical effects are playing a “negative” role in promoting the “reduction of carbon emissions”. Moreover, observed from the strength of the above three effects, the scale effect has made the maximum contribution to the growth of emission of China's export trade. Similarly, the structural effect has played a second important role in the growth of embodied carbon emissions in China’s export trade. However, the technical effect, to some extent, has slowed down the growth of embodied carbon emissions of China’s export trade.

(4) The research on the impact of the regulation of low-carbon emission reduction on the competitiveness of China's export trade is another innovation of this article. In the short term, the carbon abatement cost is regarded as the factor inputs to increase the production costs of corporations, thus weakening a country's comparative advantage and the competitiveness of its export products. However, the view from the long-term dynamic effects could make a conclusion that the regulation of low-carbon emission reduction will stimulate technological innovation of enterprises, thereby enhancing the international competitiveness of export products. This paper makes the second innovation to combining the complete carbon producing coefficient, the index of the power of dispersion, the index of the sensitivity of dispersion, the index of the structure of export trade, and the index of the specialization measurement of the export trade in order to measure and study the impacts of the low-carbon economy on the competitiveness of Chinese export trade. Meanwhile, this paper makes a simulation set of carbon tariff rates, making an empirical analysis of the impacts of carbon tariffs on the international competitiveness of China's industry exports. The conclusion shows that the carbon tariffs, as the representative of the regulation of low-carbon emission reduction, will cause a serious impact on China’s export trade of carbon-intensive industries. The limited profit margins of China’s exports will be further compressed by the high carbon tariffs. Therefore, the government, industries and enterprises of China should jointly study and improve the development strategy of low-carbon economic to determine the suitable development model for China's export trade, enhancing the core competitiveness to cope with the challenges of low-carbon economy and ensuring the truly sustainable development of China’s exports trade.

Read the full article here:       低碳经济背景下优化我国外资结构问题研究.pdf