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<p>This paper examines how participation in global value chains (GVCs) shapes countries’ greenhouse gas (GHG) emissions, distinguishing between the environmental implications of forward (upstream) and backward (downstream) integration. Using a new dataset that combines the OECD Inter-Country Input–Output tables, Trade in Value Added indicators, and GHG footprint data for 75 economies and 45 sectors from 1995 to 2020, the analysis traces emissions embodied in both domestic production and bilateral trade flows. An additive Logarithmic Mean Divisia Index (LMDI) decomposition reveals that rising output has been the principal driver of growing production-based emissions, while improvements in emission intensity have only partly offset scale effects. Fixed-effects and instrumental-variables regressions show that forward GVC participation is consistently associated with lower domestic emissions, whereas backward participation exhibits no systematic effect. A PPML gravity model of emissions embodied in bilateral trade demonstrates that forward participation reduces trade-embedded emissions across most sectors, while backward participation yields heterogeneous outcomes—lowering emissions in agriculture, mining, and utilities but raising them in manufacturing and services. The results highlight that environmental gains arise most reliably when countries specialise in upstream, technology-intensive tasks, while downstream final production may increase emissions through scale and logistics effects. The paper concludes by discussing policy strategies that support functional upgrading, facilitate technology diffusion, and enable developing economies to balance the employment benefits of backward participation with long-term environmental objectives.</p>

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Do global value chains clean or harm the environment?

  • 期刊论文

  • 发表日期：

    2026年3月4日

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  • C. Veeramani,
  • Manish

摘要

This paper examines how participation in global value chains (GVCs) shapes countries’ greenhouse gas (GHG) emissions, distinguishing between the environmental implications of forward (upstream) and backward (downstream) integration. Using a new dataset that combines the OECD Inter-Country Input–Output tables, Trade in Value Added indicators, and GHG footprint data for 75 economies and 45 sectors from 1995 to 2020, the analysis traces emissions embodied in both domestic production and bilateral trade flows. An additive Logarithmic Mean Divisia Index (LMDI) decomposition reveals that rising output has been the principal driver of growing production-based emissions, while improvements in emission intensity have only partly offset scale effects. Fixed-effects and instrumental-variables regressions show that forward GVC participation is consistently associated with lower domestic emissions, whereas backward participation exhibits no systematic effect. A PPML gravity model of emissions embodied in bilateral trade demonstrates that forward participation reduces trade-embedded emissions across most sectors, while backward participation yields heterogeneous outcomes—lowering emissions in agriculture, mining, and utilities but raising them in manufacturing and services. The results highlight that environmental gains arise most reliably when countries specialise in upstream, technology-intensive tasks, while downstream final production may increase emissions through scale and logistics effects. The paper concludes by discussing policy strategies that support functional upgrading, facilitate technology diffusion, and enable developing economies to balance the employment benefits of backward participation with long-term environmental objectives.