Global value chain participation and trade-induced energy inequality

Abstract

Different ways of participating in global value chain (GVC) result in the disparity of international-trade-induced resource and environmental costs, hence inequality between trading economies. This study delves into the trigger and mechanism towards trade-induced energy inequality. First, we explore the trade-induced energy use and energy inequality using multi-regional input-output analysis and the production decomposition analysis; then we apply econometric analysis to further explore how different ways of participating in GVC affects a country's trade-induced energy use, and illustrate the mechanism of trade-induced energy inequality. Our results uncover that, globally, trade induced-energy use per value-added in developed countries constantly remain the lowest, while that of the developing nations is higher. Our econometric analysis further demonstrates that forward-linkage GVC participation can significantly reduce the domestic energy use per value-added, whilst backward-linkage participation may increase energy use per value-added, indicating different effects through forward- and backward-linkage as a key driving factor for trade-induced energy inequality. Our heterogeneity examination results further reveal that the influencing mechanisms of GVC participation on energy use per added value vary greatly with energy type, trade mode and each nation's resource endowment. Implications of our findings may be that optimizing GVC participation is beneficial to domestic resource conservation and environmental protection, especially for developing countries, for which escalating up their ranks of GVC could be crucial to reduce their trade-induced resources and environmental costs.