Carbon transfer within China: insights from production fragmentation

Abstract

Production fragmentation not only reshapes trade patterns but also reallocates trade-related emissions. This study employs China's multi-regional input-output tables for 2007, 2010 and 2012 to explore the effect of production fragmentation on virtual carbon trade derived from three trade patterns, i.e. final goods trade, intermediate goods trade for the final stage of production, and value chain-related trade. Results showed that inter-provincial trade within China reduced the national carbon emissions by 208 Mt. and 114 Mt. in 2007 and 2012. The first two trade patterns contributed to the reduction, while value-chain-related trade resulted in carbon growth. The four trillion yuan stimulus package promoted the development of energy intensive industries while inter-provincial trade increased national carbon emissions by 247 Mt. in 2010. Moreover, this study revealed a list of provinces, trade patterns and sectors with the high carbon reduction potential.