Impact of trade on China’s SO2 emissions is relatively small

HE Jie

Department of Economics, Faculty of Administration and GREDI, University of Sherbrooke, Canada

Abstract:

To better understand trade’s impact on the environment, we construct a four-equation simultaneous system in which three economic determinants define emissions: scale, composition and technique effects, all embodied directly by trade. Supposing the three economic determinants are also endogenous to trade, we check the indirect impacts of trade on the environment in the following three functions through the intermediation of the three effects. We then estimate 29 Chinese provinces’ panel data in the model on industrial SO2 emissions (1993-2001). Our estimation results reveal that export expansion and the accumulation of manufactured goods imports had the opposite roles on industrial SO2 emissions determination. The results do not support the “pollution haven” hypothesis; the reinforced competition exporters face is a positive factor that encourages technological progress in pollution abatement. China’s actual comparative advantage resides in labor-intensive industries; exporting to the world market actually helps to reduce the pollution increases caused by China’s heavy-industry-oriented industrialization strategy, which government-intervened import activities traditionally support.

Key words:

International trade, industrial SO2 emissions, simultaneous system, scale effect, composition effect, income effect, Hypothesis of “Porter” and “Racing to the bottom,” China

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