RTAs and firm energy-related carbon emissions: from the perspective of trade creation and trade diversion in intermediates import

ABSTRACT

Regional trade agreements (RTAs) are playing an increasingly crucial role in the current international trade pattern of ebbing globalization, making it increasingly important to comprehensively analyse RTAs’ impacts. Trade creation and trade diversion have been hot-button topics on RTAs since Jacob Viner raised, many scholars had conducted extensive research on their economic impacts, but little is known about their environmental impacts. In this paper, we take the China-ASEAN Free Trade Area (CAFTA) as an example, comprehensively consider the tariff, geographic and temporal dimensions of trade to characterize the proxy variables that identify the two effects. Based on data of Chinese enterprises from 2002 to 2007, we empirically tests the impact of the trade effects on energy-related carbon emissions of enterprises from a fixed-effects panel model. Research finds the trade creation effect increases enterprises’ $\mathrm{C}{\mathrm{O}}_2$ emissions intensity, whereas the trade diversion effect reduces and is more influential. Further mechanism analyses show coal use status of enterprises, especially coal consumption, utilization intensity, and share in primary energy consumption are important influence channels. Additionally, the scale and factors composition of production and technical efficiency are also important mechanisms. Furthermore, enterprises in different regions and of different ownership types show heterogeneity.

KEYWORDS:

• RTAs
• CAFTA
• trade creation and diversion effects
• carbon emissions
• intermediates
• trade in intermediates

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Trade creation and trade diversion are Incoterms first proposed by Jacob Viner’s (1950), and the detailed introduction and implications of our research framework are presented in Section 3.2.

² Among them, enterprises in the China Industrial Enterprise Database have an annual main business income of 5 million RMB and above, and the enterprises in the China Industrial Enterprise Pollution Database are industrial enterprise units whose emissions account for more than 85% of the total emissions in each region.

³ Source: The World Resources Institute, 2020.

⁴ Source: China Energy Statistical Yearbook.

Additional information

Funding

This project is supported by the National Major Project of the National Social Science Fund of China (Grant No. 20&ZD109).