Why is pollution embodied in Guangdong exports declining? The roles of trading scale, technology and structural changes

Abstract

From 2007 to 2017, Guangdong exports grew at an average rate of 9.6%, while the energy consumption and carbon emission embodied in these trades demonstrated a declining trend. Is total real pollution embodied in exports showing the same trend? If so, what accounts for these changes? Prior studies have provided three explanations, producing greater amount of goods (“the scale effect”), adopting cleaner technologies in production processes (“the technology effect”), and producing proportionally more goods that are environmental-friendly (“the structural effect”). Question then arises as which factor is the driving force of such cleanup in the export business? To answer these questions, an EIO-LMDI (Environmental Input-Output and Logarithmic Mean Divisia Index) model is built to conduct a structural decomposition analysis of pollution embodied in Guangdong exports. We calculate that the pollution embodied in Guangdong export fell by 63 to 85 percent, depending on the pollutants. We further conclude that these pollution reductions are primarily driven by the technology advancement, with some industries, including the clothing industry, communications, computers and other electronic equipment, being more sensitive to the changes in technologies than others. The structural effect is more ambiguous. It only contributes to pollution reduction when the industry itself is pollution intensive.