Global Value Chain Linkages and Carbon Emissions embodied in trade, An Evidence from Emerging Economies: Uncovering Connections

Abstract

This study explores whether the Global Value Chain(GVC) participation of 16 emerging market economies (EMEs) from 1995 to 2018 in the manufacturing sector leads to a rise in carbon emissions embodied in trade. The study covers the ecological dimension of the Global Value Chain and validates the Pollution Haven Hypothesis in developing nations.To address the problem of cross-sectional dependence, autocorrelation, and heteroscedasticity panels, we estimate the above models using the feasible generalized least squares (FGLS) method. Our findings exhibit a continuous growth in carbon emissions of all the EMEs, there exists a positive association between GVC participation and domestic CO2 emissions embodied in gross exports. Also, EMEs' foreign carbon emissions embodied in gross exports directly correlate with backward GVC Participation, suggesting that the cleaner environment in developed countries comes at the expense of a dirtier environment in developing countries.