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Global value chain participation and trade-induced energy inequality

Ji, X; Liu, Y; Wu, G; Su, P; Ye, Z; Feng, K; (2022) Global value chain participation and trade-induced energy inequality. Energy Economics , 112 , Article 106175. 10.1016/j.eneco.2022.106175.

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Under economic globalization, developing countries are suffering from international- trade-induced resource and environmental cost based on their ways of participating in global value chain (GVC), hence inequality between trading economies occurred. Existing literature mainly focuses on revealing the fact of ecological exchange inequality behind trades, but rarely delves into the trigger and mechanism towards such inequality, not least any studies on the influence of GVC participation. Moreover, most of the existing studies treat energy, which is a key factor to economic growth and global climate change, as a subset of environmental indicators for ecological unequal exchange analysis, thus lack a whole-picture of trade-induced energy inequality with regard to its modes, driving factors, and the heterogeneous mechanism of its driving factors. This study firstly explores the trade-induced energy use and energy inequality using multi-regional input-output analysis and the production decomposition analysis, then econometric analysis is applied to further explore how different participation in GVC affects a country’s trade-induced energy use, which illustrate the mechanism of trade-induced energy inequality. Our results uncover a striking difference in the domestic energy use per value-added of countries engaged in bilateral trade. From year 2000 to 2014, trade induced energy use per value-added in developed countries always remain the lowest around the globe, while that of the developing nations is more than twice higher, indicating that the trade-induced energy inequality was remained during the studied period. The econometric analysis displays that participation in forward-linkage of the GVC can significantly reduce the domestic energy use per value-added while participation in backward-linkage may increase energy use per value-added, indicating that the GVC participation is a key driving factor for trade-induced energy inequality. Our heterogeneity examination results further reveal that: first, the influential mechanisms of GVC participation on energy use per added value cross energy types are similar between coal and new energy, but oil and natural gas have their own influential mechanism. Second, the impact of GVC participation on energy use per added value amplifies as the GVC activities become more complex. Third, resource endowment would affect national industrial developing pattern, leading to striking difference among the impacts of GVC participation on nations rich with resource endowment and that on nations poor in resource endowment. Namely, forward-linkage GVC participation shows a greater effect on energy use per added value of resource-deficient nations, whilst backward-linkage GVC participation exerts more substantial impact on energy use per added value of resource-wealthy nations. Our findings imply that optimizing GVC participation is beneficial to domestic resource conservation and environmental protection, especially for developing countries, for which enhancing their rank of GVC is feasible to reduce their trade-induced resources and environmental costs.

Type: Article
Title: Global value chain participation and trade-induced energy inequality
DOI: 10.1016/j.eneco.2022.106175
Publisher version: https://doi.org/10.1016/j.eneco.2022.106175
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Global value chain participation; trade-induced energy inequality; energy use per value-added; heterogeneity; forward-linkage participation; backward-linkage participation
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
URI: https://discovery.ucl.ac.uk/id/eprint/10140384
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