International trade, CO₂ emissions, and re-examination of “Pollution Haven Hypothesis” in China

We use input-output analysis and Levinson’s structural decomposition method to measure China’s CO₂ emissions under the no-trade hypothesis, to calculate how international trade affects China’s emissions. We also analyze the driving factors of the difference between hypothetical no-trade CO₂ emissions and actual emissions and discuss the existence of “Pollution Haven Hypothesis” (PHH) in China. The results show that (1) from 2000 to 2017, the hypothetical no-trade CO₂ emissions are 2.43–14.67% lower than actual emissions. The scale effect is the main cause of this difference, while the composition effect fluctuates and has little impact. (2) Although exports make other economies’ CO₂ emissions transfer to China, imports also help avoid China’s emissions from some carbon-intensive sectors. (3) International trade has little impact on the cleanliness of China’s industry composition. The no-trade industry composition is slightly cleaner than the actual one before 2010, after which trade improves the cleanliness of industry composition to a small extent. PHH is invalid for China in recent years, and results for most developing countries do not support PHH. (4) The relationship between no-trade effects and income per capita for all the economies does not also support PHH. Most economies reduce emissions, and their industry compositions are cleaner because of trade, regardless of their development degree. Trade will not severely influence China’s future emission reduction, and improving the cleanliness of carbon-intensive sectors should be paid more attention to.