Journal of Environmental Management 347 (2023) 119027

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Journal of Environmental Management

journal homepage: www.elsevier.com/locate/jenvman

Research article

Global value chains participation and trade-embodied net carbon exports in

group of seven and emerging seven countries
Mehmet Demiral a, *, Özge Demiral b
a
Department of Economics, Niğde Ömer Halisdemir University, Niğde, Türkiye
b
Department of International Trade and Logistics, Niğde Ömer Halisdemir University, Niğde, Türkiye

A R T I C L E I N F O A B S T R A C T

Handling Editor: Raf Dewil A vast literature has examined the empirical link between gross exports and total carbon emissions for different
country groups. However, countries’ increasing participation in global value chains (GVCs) challenges this
Original content: Research Data
Used/Analyzed (Reference data) traditional approach since the gross measures neglect trade-embodied carbon emissions and intermediates-
driven value-added trade. Therefore, this study scrutinizes how backward participation (foreign contents in
Keywords: domestic exports) and forward participation (domestic contents in foreign exports) in GVCs affect per capita net
Global value chain exports of trade-embodied carbon dioxide emissions. The study adopts input-output accounting and value-added
Backward participation decomposition framework for Group of Seven (G7) and Emerging Seven (E7) countries over the 1995–2018
Forward participation period. (i) Pre-estimation analyses reveal that the net carbon importer G7 group had a comparative advantage in
Net carbon export high-tech exports and a lower export product concentration level, while the net carbon exporter E7 group had a
Group of seven comparative advantage in resource-intensive exports and a higher export product concentration level, albeit
Emerging seven
significant within-group heterogeneities. (ii) The augmented mean group estimates reveal that increasing
backward participation raises net carbon exports for both G7 and E7. The forward participation-net carbon
exports nexus is negative for G7 but positive for E7. (iii) While economic growth reduces net carbon exports in
both groups, the effects of comparative advantages in resource-intensive and high-tech exports differ. Practi­
tioners should be aware of the GVCs-driven carbon circle when assessing decarbonization performances and
obligations of countries.

1. Introduction decarbonization initiatives is crucial to facilitate the world’s race to net

Reducing carbon dioxide (carbon hereafter) emissions, which have
neared three-fourths of anthropogenic greenhouse gas emissions at the
global level (Olivier, 2022), has become an essential task for every
country (Wang et al., 2023a). The rising concern about carbon emissions
has increased the unified operations of the United Nations Framework
Convention on Climate Change (UNFCCC) to foster low-carbon (in the
short-term) and zero-carbon (in the long-term) solutions (UNFCCC,
2023). Local policy-makers also endeavor to combine decarbonization
and trade-oriented economic growth strategies optimally (Wang et al.,
2023b). Several countries, especially developed economies with high
carbon intensity, recently have had success in decoupling their pro­
duction and export from carbon intensity. However, this greening tra­
jectory is relative and is undermined by the low but increasing carbon
intensity in production and export of other countries, especially that of
developing economies. Therefore, a coalition of local and global
zero carbon emissions by 2050. However, coordination failures in these
initiatives seem to be leading to a green race to the top among firms in
developed countries, but a grey race to the bottom among firms in
developing countries (Bu and Wagner, 2016; Kim and Rhee, 2019;
Demiral and Demiral, 2021).
From the research perspective, the prevailing interest in this global
carbonization and decarbonization polarization centers on cross-
country carbon relocation based on the well-documented pollution
haven hypothesis (PHH). The PHH literature has two key directions. The
first strand has focused on the carbon-carrying functions of foreign
direct investments and multinational business operations (Wagner and
Timmins, 2009; Cole et al., 2017; De Beule et al., 2022). The second
strand has expanded the PHH to emission outsourcing and carbon
leakage aspects by considering the role of international trade (Naegele
and Zaklan, 2019; Sorroche-del-Rey et al., 2022). This second strand has
enriched our understanding of the trade-carbonization nexus by also

* Corresponding author. Department of Economics, Niğde Ömer Halisdemir University, 3/361, Main Campus, 51240, Niğde, Türkiye.
E-mail addresses: mdemiral@ohu.edu.tr (M. Demiral), odemiral@ohu.edu.tr (Ö. Demiral).

https://doi.org/10.1016/j.jenvman.2023.119027
Received 28 November 2022; Received in revised form 28 August 2023; Accepted 15 September 2023
Available online 25 September 2023
0301-4797/© 2023 Elsevier Ltd. All rights reserved.
M. Demiral and Ö. Demiral
distinguishing between production-based and consumption-based car­
bon emissions (Liddle, 2018; Demiral et al., 2022) and by considering
trade-embodied carbon emissions (Long et al., 2018; Kang, 2021). The
fundamental mindset of the PHH is that developed countries’ involve­
ment in environmental governance is higher than that of developing
countries. Thus, trading firms in developed countries are more exposed
to environmental pressures by their stakeholders including suppliers,
customers, and government, compared to their counterparts in devel­
oping countries. This environmentally unpleasant match has not miti­
gated global carbon pollution but relocated it from developed to
developing countries through the exchange of the so-called clean and
dirty products and investments. These adverse trends in carbonization
have given rise to research and policy debates on the redistribution and
responsibilities of carbon emissions across countries.
On the other hand, the development of global value chains (GVCs),
which is sometimes named the new wave of globalization (Milberg and
Winkler, 2013), is increasing with new entries of products and firms
from different countries. GVCs are a consequence of firms’ location
optimization of production processes to benefit from varying cost ad­
vantages. GVCs have become more significant in world trade as the
participation of developing countries, notably emerging economies, in
GVCs has also increased since the early 1990s. By 2020, GVCs accounted
for around half of world trade (World Bank, 2020).
Trade theories have also evolved to reflect the development of GVCs
(World Bank, 2020). The traditional trade theories assumed horizontal
specialization and suggested that the exported products were made
entirely in the same country based on the comparative cost advantages
of factor endowment. Consistently, firms were trying to build domestic
and regional supply chains. However, dramatic progress in information
and communication technologies and sharp declines in trade barriers, as
well as in transportation expenses and international coordination costs,
have spread the local supply chains to many countries. GVCs have
spurred vertical specialization in international trade, where different
stages of production are regularly performed in different countries. As
intermediate inputs cross borders multiple times, gross measures that
build on traditional trade theories become increasingly less efficient
(due to the multiple counting) to reflect the flows of actual value-added
in international trade (Koopman et al., 2014).
GVCs are characterized by the intermediates trade, which is observed
with more energy use and more carbon emissions than the final products
trade (Xiao et al., 2020; Wu et al., 2020; Jiang et al., 2021). Therefore,
expanding knowledge about environmental management at the GVCs
level has become an important research and policy implication, but
challenges traditional approaches. It is now well-known that the tradi­
tional gross measures of decarbonization performances may also veil the
actual carbon emissions circle in GVCs when assessing global re­
sponsibilities of production-induced carbon emissions (Zheng, 2021).
Although some recent research in the literature on the trade channels of
global carbon migration has combined countries’ trade-embodied car­
bon emissions with their GVCs participation (Wu et al., 2020; Wang
et al., 2021; Liu and Zhao, 2021), the interest has yet remained limited
to capture the complex carbonization impacts of the dynamic develop­
ment of GVCs. More specifically, countries participate in GVCs through
intermediate imports embodied in exports (backward linkages) and
domestic value-added in partners’ exports (forward linkages) (OECD,
2023), but very limited research has considered this distinction.
Besides recent attempts, the literature still has several research gaps.
Firstly, the available evidence on the relationships between value-added
trade and trade-embodied carbon emissions is scant. Secondly, the
distinction between backward and forward participation in GVCs needs
more attention. Thirdly, the balance of trade embodied emissions mat­
ters for the net carbon effect of GVCs participation but remains over­
looked. Fourthly, the carbon intensity mechanisms of the widely-cited
scale, composition, and technique effects have not been reflected
adequately from the GVCs perspective. Lastly, due to the limited avail­
ability of internationally comparable and harmonized input-output
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Journal of Environmental Management 347 (2023) 119027
data, studies mostly conduct analyses at either the firm/country level
or global level, which are unable to capture the long-run cross-country
carbon distribution roles of GVCs. More specifically, no evidence is
available on the comparison of the Group of Seven (G7) and Group of
Emerging (E7) countries, which have prominently high shares in GVCs
participation and embodied global carbon emissions. Our study will
contribute to resolving these identified flaws. Addressing the first three
limitations, our study converts the cross-border circular production
processes of GVCs into the value-added concept and distinguishes GVCs
participation between backward and forward participation. We
decompose trade-embodied carbon emissions to measure the net carbon
export and examine how it is affected by distinguished GVCs partici­
pation. For the fourth flaw, we also consider control variables including
relative advantages in resource-intensive and high-technology (high-
tech) exports, as well as export concentration structures and per capita
domestic income levels of countries. For the last limitation, we analyze
the long-run associations in the cases of G7 (Canada, France, Germany,
Italy, Japan, the United Kingdom, and the United States) and E7 (Brazil,
China, India, Indonesia, Mexico, Russia, and Türkiye) panels compara­
tively over the 1995–2018 period by following robust methods.
2. Theory, evidence, and hypotheses
GVCs spread the production processes including design, parts pro­
curement, assembly, supply chain building, and distribution across firms
operating in different countries. As Fig. 1 demonstrates, from a broader
perspective, at least three countries are involved in GVCs. The first
country exports raw materials to the second country, where raw mate­
rials are made into semifinished intermediate products. The second
country then sends these intermediates to the third country, which fi­
nalizes the products. Eventually, the third country consumes the
finished products itself and/or exports them to the rest of the world,
including the first and second countries. The length of GVCs indicates
the number of production stages and tasks, while the GVCs depth refers
to the number of participating countries. The distance of GVCs shows the
position of a country in a product’s global value chain from beginning to
finalizing (De Backer and Miroudot, 2013).
GVCs have mixed impacts on carbon emissions depending on the
relative importance of the carbon-intensifying scale (participation) ef­
fect, the changeable composition (specialization) effect, and the carbon-
abating technique (upgrading) effect (World Bank, 2020). The scale
effect is associated with the growing economic activities driven by
GVCs. Compared to the standard trade, GVCs-related input trade entails
more transportation, shipment operations, and logistics services, which
all consume more energy (mostly supplied by fossil resources) and emit
more carbon. When other conditions do not change, countries with
increasing GVCs participation will face certain growth in carbon emis­
sions. Composition effects are mixed and related to specialization posi­
tions of countries’ embeddedness. GVCs enable some countries to
relocate the resource-based and pollution-intensive stages and tasks
internationally to preserve scarce resources and reduce carbon emis­
sions. The technique effects have some carbon efficiency channels as
GVCs can promote improvements in pro-environmental production
techniques. The environmental knowledge spillovers among firm net­
works facilitate the development and embracement of carbon-saving
techniques and eco-innovation.
Carbon reduction efforts that focus on the control of emissions effects
of domestic production and consumption activities tend to fail when
they do not consider the carbon trade between consuming and pro­
ducing countries in GVCs (Chen et al., 2022). However, the current
understanding of the environmental impacts of GVCs is mostly restricted
to the mixed evidence of the gross trade-carbon pollution (Li et al.,
2021a; Wang et al. 2023a, 2023b) and overall GVCs
participation-carbon pollution nexuses (Wang et al., 2019; Assamoi
et al., 2020; Hertwich, 2020; Liu et al., 2021; Tang et al., 2022). This
scant knowledge complicates and limits the assessment of countries’
M. Demiral and Ö. Demiral
Fig. 1. The functioning of global value chains.
Source: Authors’ illustration.
responsibilities for global carbon emissions. The widely-accepted pro­
ducer’s and consumer’s responsibility principles have become imprac­
tical when allocating global carbon emissions responsibilities across
countries (Zheng, 2021). The producer’s responsibility approach is un­
fair as traded products in GVCs are made of many values added by
different countries but consumed in a country. Indeed, every stage of the
production of traded products may emit carbon directly and/or indi­
rectly, meaning that the producers emit it for the consumer countries.
This unfairness becomes more salient when the products are
re-exported. The consumer countries’ responsibility principle is also
unreasonable as the producer countries have economic benefits from the
production. Distributing carbon responsibility based on the income level
of countries, as current global initiatives commonly practice and most
researchers conclude, will be inefficient in tackling global carboniza­
tion. Therefore, the shared principle is more efficient for a fair re­
sponsibility distribution, which needs to explore which countries emit
how much carbon in the stages of products. Regarding this, the
distinction between backward and forward participation in GVCs mat­
ters. Backward participation refers to the foreign value-added content of
exports. This is the buyer perspective or demand side in GVCs, where an
economy imports intermediates to produce its exports. Forward partic­
ipation corresponds to the domestic value-added contained in inputs
sent to other economies for further processing and export. This is the
seller perspective or supply side of GVCs participation (OECD and WTO,
2016).
The number of studies examining the GVCs participation-carbon
emissions nexus is limited but has increased recently for varied groups
of countries as their input-output datasets are made available. Jiang and
Liu (2015) showed that advanced economies received more value-added
and emitted less carbon than emerging economies in the international
trade of information and communication technology manufacturing in
GVCs over the 1995–2008 period. Taking 35 sectors of 41 countries from
1995 to 2009, Meng et al. (2018) showed that developed economies
were using highly carbon-intensive intermediates imported from
developing economies. Wang et al. (2019) utilized data from 62 coun­
tries from 1995 through 2011 and found that participation degree in
GVCs displayed an inverted U-shaped relationship with per capita car­
bon emissions in most cases. Hertwich’s (2020) decomposition analysis
covering the 1995–2012 period indicated that increasing GVCs accel­
erated the transition of carbon emissions across countries. The declining
domestic value-added in exports of industrialized countries contributed
to this transition and emerging economies’ content production tended to
increase carbon emissions.
Addressing the high carbon circle they exacerbate, GVCs are
3
Journal of Environmental Management 347 (2023) 119027
sometimes attributed to the global pollution chains. For instance, using a
dataset of 40 countries’ 35 industries over the 1995–2011 period, Duan
et al. (2021) found that high-income countries offshored mostly the
carbon-intensive dirty production stages to low-income countries.
Indeed, when the high-value-added cleaner production in developed
countries is supplied by low-value-added and highly-emission-loaded
inputs from developing regions, GVCs function as pollution chains. Liu
et al. (2021) concluded that, on a global average, the value-added
gained per unit of carbon emissions embodied in GVCs increased dur­
ing 2000–2014, but it did not bring net value-added to developing
regions.
The widely-cited decarbonization contribution of GVCs is the tech­
nology transfer, for which the level of countries’ GVCs involvement
matters. Concerning the GVCs threshold in five members of E7
(excluding Indonesia and Türkiye) over the 1995–2009 period, Wang
et al. (2021) showed that when the degree of GVCs participation was
lower than the threshold, technological progress increased carbon
pollution, whereas once participation exceeded the threshold, techno­
logical progress reduced emissions. Consistently, Assamoi et al. (2020)
showed that higher participation in GVCs reduced carbon emissions
between 1995 and 2014 in selected Asian countries with high GVCs
connectivity.
However, the emission-carrying function of GVCs is not always the
case. The structural decomposition analysis of Xiao et al. (2020) for 41
economies from 2010 to 2014 revealed that the carbon intensities
embodied in international trade were lower than overall domestic car­
bon intensity in most of the developing countries, whereas it was the
opposite in most of the developed countries. Researching the 2000–2014
period of 42 countries, Liu and Zhao (2021) showed that GVCs partici­
pation had a significantly negative impact on the embodied carbon
emission intensity. Moreover, they also confirmed that developing
countries’ GVCs participation had a larger negative impact on embodied
carbon intensity compared to that of developed countries.
Several studies distinguished between backward and forward GVCs
participation. Ma et al. (2022) examined the electro-optical equipment
manufacturing industry of 65 countries from 2005 to 2015 and showed
that the backward participation was positively associated with the total
imported carbon emission intensity, while the forward
participation-carbon intensity link was negative. Using data from 12
countries during 2000–2017, Qian et al. (2022) found that backward
participation, especially in low-tech industries, increased emissions by
expanding the trade scale but forward participation, especially in
medium-tech and high-tech industries, reduced emissions by improving
production technology. Using the 2005–2016 data from 33 countries,
M. Demiral and Ö. Demiral
Shi et al. (2022) showed that the increasing forward participation
reduced carbon emissions, particularly in developed countries. They
also argued that deepening backward participation would reduce carbon
emissions in developed countries but increase emissions in developing
countries. They conclude that the paths of scale, composition, and
technology effects perform differently and the carbon effects of forward
and backward participation commonly depend on the technology effect.
Tang et al. (2022) investigated 56 industries in 43 countries from 2000
to 2014 and evidenced that backward participation was positively
associated but forward participation was negatively associated with
carbon intensity. More specifically, they showed that GVCs participation
not only increased the carbon intensity but also tended to reduce the
carbon abatement contribution of the structural shift from industry to
service sectors, wherein backward participation was decisive. The esti­
mates of Ye et al. (2020) from 1995 to 2009 showed that backward
participation increased carbon intensity in general but more signifi­
cantly for developed countries. However, forward GVCs participation
tended to decrease carbon intensity for developing countries, while the
association was positive for developed countries.
The highlighted conclusion drawn from the relevant literature is that
GVCs participation can redistribute carbon emissions across partici­
pating countries. This redistribution changes by country characteristics
(developed or developing), technology capacity (low to high), type of
GVCs participation (backward and forward), and the considered control
variables. These country heterogeneities are premised on the following
hypotheses:
Hypothesis 1. Advanced countries are net importers while emerging
countries are net exporters of the trade-embodied carbon emissions
Hypothesis 2. Advanced and emerging countries have significantly
different income levels and specialization structures
When the first hypothesis is confirmed and it is linked to the second
hypothesis, advanced countries are expected to have specialized in the
low-carbon chains of GVCs but by using carbon-intensive value-added
from developing (and emerging) countries. The premised carbon-
carrying function of GVCs indicates that advanced countries use im­
ported carbon-loaded inputs to produce for and export to other coun­
tries. Thus, the advanced countries’ production and export will likely
have a carbonization impact from backward GVCs participation but a
decarbonization impact from forward GVCs participation. Consistently,
the opposite directions are predicted for emerging countries within the
argued carbon-circle in GVCs. Consequently, considering the available
evidence and net carbon trade structures of the developed and emerging
countries, the following hypotheses are put forward:
Hypothesis 3. Backward GVCs participation is positively associated
but forward GVCs participation is negatively associated with the net
exports of the trade-embodied carbon emissions in advanced countries.
Hypothesis 4. Backward GVCs participation is negatively associated
but forward GVCs participation is positively associated with the net
exports of the trade-embodied carbon emissions in emerging countries.
3. Data and method
3.1. Model, variables, and data sources
We test the proposed hypotheses by representing advanced and
emerging countries by the G7 and E7 blocs, respectively. Like the G7
countries, the E7 countries have started participating in more complex
GVCs compared to some other developing countries that still export
commodities and engage in limited manufacturing.
The choice of the period (1995–2018) is based on the availability of
data. We have sampled these country groups since they have consider­
ably higher shares in international production, trade, and global carbon
emissions. These countries have also been increasingly participating in
4
Journal of Environmental Management 347 (2023) 119027
GVCs. All the sampled countries signed and ratified both the Kyoto
Protocol and the Paris Agreement under the United Nations Framework
Convention on Climate Change (UNFCCC). The UNFCCC divides coun­
tries into three main groups according to differing commitments: Annex
I Parties include mostly industrialized countries that are members of the
Organisation for Economic Co-operation and Development (OECD) and
transition economies. Annex II Parties consist of the OECD members of
Annex I, excluding transition economies, while Non-Annex I Parties are
mostly developing countries. Türkiye and Russia together with G7
countries are in Annex I, while the remaining five members of E7 are
among Non-Annex I countries (UNFCCC, 2023). Non-Annex I countries
have relatively loose environmental regulations and lower carbon
emission constraints.
After confirming the first two hypotheses, we decomposed both the
trade-embodied carbon emissions and GVCs participation to explore the
associative effects in the last two hypotheses. To this end, we con­
structed the baseline model as in Equation (1).
NXCEPCit = α0 + β1 (BPGVCit ) + β2 (FPGVCit ) + βk (Zit ) + uit (1)
In Equation (1), NXCEPC is the dependent variable that denotes per
capita net export of carbon dioxide emissions, while BPGVC and FPGVC
are the independent variables that symbolize the countries’ backward
and forward GVCs participation, respectively. The subscript i (i = 1, …,
N = 7) denotes countries and t (1995, …,2018 = T = 24) is years, while
α0 is the constant and u is the error term. The β parameters are partial
slope coefficients to be estimated and Z is the set of kx1 control vari­
ables. We measured NXCEPC as tons of per capita net export of carbon
emissions embodied in international trade. Net export of carbon emis­
sions is the difference between total carbon emissions embodied in gross
exports and those in gross imports (Yamano and Guilhoto, 2020; OECD,
2023). We extracted data on carbon emissions embodied in interna­
tional trade from the recent (2021) edition of the input-output dataset of
OECD’s (2023) structural analysis (STAN) database. We gauged it as per
capita using the mid-year total population statistics of OECD (2023) to
eliminate the biases caused by the large differences in countries’
populations.
Backward GVCs participation (BPGVC) of a country is the rest of the
world’s (world partner) value-added share in the country’s gross exports
and is often referred to as imported contents of exports (vertical
specialization). Foreign value-added (FVA) content of gross exports
(GREX) captures the value of imported intermediate goods and services
that are embodied in a country’s exports. The value-added can come
from any foreign industry upstream in the production chain (Guilhoto
et al., 2022; OECD, 2023):
[ ]
GREXFVAc,i = V ̂ Bc,i GREXc,i (2)
In Equation (2), Bc is the column of B corresponding to inputs used by
sector i in country c, where the rows corresponding to inputs from origin
industries in country c are set to zero. BPGVC of a country c with its total
export in all sectors (i) with world partner (p) is calculated as foreign
value-added embodied in gross exports (GREXFVA) as a % share of total
gross exports (GREX) as shown in Equation (3) (Guilhoto et al., 2022;
OECD, 2023):
∑
p GREXFVAc,i,p
GREXFVAc,i,p = ∑ 100 (3)
p GREXc,i,p
The forward GVCs participation of a country (FPGVC) is the coun­
try’s domestic value-added (DVA) embodied in the rest of the world’s
gross exports (OECD, 2023). This indicator represents the country c’s
domestic value-added content embodied in the gross exports of foreign
countries as a % share of the total gross exports of country c. This is
formulated as in Equation (4) (Guilhoto et al., 2022; OECD, 2023) where
the numerator is the total value-added from country c embodied in the
exports of country p, while the denominator is the gross value-added
M. Demiral and Ö. Demiral
exports of country c.
( )
GREXDVAc,p
FPGVCc,p = 100 (4)
GREXc
We gauged both BPGVC and FPGVC as a % share in the country’s
total exports to have conveniently comparable measures. We took GVCs
participation datasets from the recent edition of trade in value-added
(TiVA) indicators in the international trade and balance of payments
database of OECD (2023).
To overcome the omitted effects, we also considered a set of control
variables, including revealed comparative advantage (RCA) in resource-
intensive (RCARI) and high-tech sectors (RCAHT), as well as export
product concentration (XPCI) and gross domestic product (GDP) per
capita (GDPPC). These indicators may induce some channels through
which they affect the net carbon exports both directly and indirectly.
Regarding the trade perspective on the GVCs-carbonization nexus,
the levels of countries’ comparative advantages in the exports of
resource-intensive sectors (structural effect), and high-tech sectors
(technologic capacity effect) matter. The technological progress of a
country determines its positioning in GVCs and affects its carbon in­
tensity. Furthermore, a country’s carbon intensity performance is not
only affected by its own technological capacity but also by global
frontiers (Ye et al., 2020). More importantly, digital-intensive high-tech
inputs have been increasingly integrated into GVCs as a new production
factor and driver of emission reduction (He and Xie, 2022). However,
the production and consumption of technology may use excessive en­
ergy and emit more carbon. This dual effect indicates a technology
threshold of GVCs participation (Wang et al., 2021). Meanwhile, as a
special case of the resource curse hypothesis, the Dutch disease refers to
declining manufacturing sectors due to expanding resource-based eco­
nomic activities (Havranek et al., 2016; Badeeb et al., 2017). Consid­
ering that most GVCs, especially high-tech ones, are strongly related to
manufacturing, countries’ increasing comparative export advantage in
resource sectors may cause some carbonization and decarbonization
consequences. These impacts depend heterogeneously on the level of the
relevant comparative advantages of the countries.
The effects of international trade on the environment have often
been analyzed through specialization patterns determined by compar­
ative advantages and factor endowments (Koopman et al., 2014; Sor­
roche-del-Rey et al., 2022). Coherently, we adopted the RCA approach
when gauging the comparative advantage in the resource-intensive and
high-tech sectors, as the RCA is an efficient metric to measure the export
competitiveness differences between countries. The RCA index is
defined as the share of a sector in a country’s total gross exports relative
to the world average of the same sector in world exports (Koopman
et al., 2014). A country has an RCA in the resource-intensive (RI) and
high-tech (HT) products groups when the ratio of the country’s exports
(X) in these products to its total exports of all products (P) exceeds the
same ratio for the world (w). Thus, for a country n, the RCA metrics in
the exports (X) of the resource-intensive (RI) and high-tech (HT) prod­
ucts are calculated through the formula in Equation (5) (UNCTAD,
2023):
/∑
Xn(RI;HT) Xn(P)
RCAn(RI;HT) = /∑ (5)
Xw(RI;HT) Xw(P)
A country with an RCA index greater than 1 is usually inferred to be a
competitive exporter of relevant products as it is positioned above the
world average. The higher RCA indices indicate higher export compet­
itiveness. By considering the grouping of Lall (2000) based on the third
5
Journal of Environmental Management 347 (2023) 119027
revision of the Standard International Trade Classification (SITC), we
computed average RCA metrics for non-agricultural resource-intensive
and high-tech products from UNCTAD (2023). Mostly, resource-based
products cover energy, minerals, metals, paper, chemicals, and petro­
leum products, while high-tech products comprise informa­
tion/communication technologies and digital products.1
Furthermore, export product concentration may alter the structural
effects. Researchers are increasingly investigating the carbonization
impacts of export diversification (Bashir et al., 2020; Wang et al., 2020;
Iqbal et al., 2021), which is taken as an antonym of export concentra­
tion. Higher export product concentration indicates that a few products
have a large share of exports, while lower values, on the contrary, mean
that exports consist of many items. This indicator is calculated as a
normalized Herfindahl-Hirschmann index of the product concentration.
For a country n, given N number of all exported merchandise (P), at the
three-digit level of the SITC-Revision 3 in our case, the export product
concentration index (XPCI) is calculated according to the formula in
Equation (6) (UNCTAD, 2023):
⎛√̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅
∑N ( / )2 √̅̅̅̅̅̅̅̅̅⎞
P=1 XP,n Xn − 1/N
XPCIn = ⎝ √̅̅̅̅̅̅̅̅̅ ⎠100 (6)
1− 1/N
The XPCI ranges from 0 (the country’s exports are homogeneously
distributed among all products) to 100 (the country exports a single
commodity). Higher XPCI values denote a higher concentration of ex­
ports. The XPCI datasets were taken from UNCTAD (2023).
One of the key factors affecting the overall carbon pollution through
the scale mechanism is GDP. Many panel studies have confirmed a
positive association between GDP and carbon emissions (Li et al., 2021a;
Safi et al., 2021; Iqbal et al., 2021; Hao and Chen, 2022). Besides, the
long-run carbon emissions and economic growth statistics at the world
level show a decoupling trend for some countries (Narayan et al., 2016),
especially when they reach higher GDP level (Wang et al., 2022, 2023a)
again under the debates on GVCs-driven cross-border carbon transition.
We reflected these impacts by including GDP per capita (GDPPC) as
thousand United States dollars at constant (2015) prices and exchange
rates taken from UNCTAD (2023).
We extended the model by including the above-mentioned control
variables as in Equation (7).
NXCEPCit = α0 + β1 (BPGVCit ) + β2 (FPGVCit )
(7)
+β3 (RCARIit ) + β4 (RCAHTit ) + β5 (XPCIit ) + β6 (GDPPCit ) + uit
In this final model, the third hypothesis indicates a positive β1 and a
negative β2 for the G7 sample, while the fourth hypothesis predicts the
opposite (β1<0; β2>0) for the E7 sample. In this modeling, GDPPC
covers the scale effect, RCARI and XPCI control for the compositional
specialization effect, and RCAHT reflects the technique effect. From the
trade perspective, these effects are expected to change across the
country samples, without a clear prediction.
3.2. Methodology
The empirical basis of the study is arranged in two steps detailed in
Fig. 2. When the first and second hypotheses are validated in the first
stage, the analysis then proceeds with the testing of the third and fourth
hypotheses in the second stage.
In the descriptive analysis, we also computed the key statistics and
pairwise correlations of variables. Then, we compared the within-group
1
Three-digit SITC codes of non-agricultural resource-intensive sectors are
281–289, 322, 325, 334, 335, 411, 511, 514–516, 522–524, 531, 532, 551, 592,
661–664, 667–689. Three-digit SITC codes of high-tech products are 525, 541,
542, 712, 716, 718, 751, 752, 759, 761, 764, 771, 774, 776, 778, 792, 871, 874,
881. Details can be found at UNCTAD (2023).
M. Demiral and Ö. Demiral
Fig. 2. Empirical framework of the study.
and between-group means of G7 and E7 samples by computing the F-test
statistics of the one-way analysis of variance (ANOVA) to explore the
extent and significance of heterogeneities.
For estimating the model in the second stage, we first conducted a
pre-estimation analysis by inspecting the cross-sectional dependence
(CD) of variables and the model. CD is a co-movement of the variables
due to unobserved common shocks arising from cross-country linkages,
which cause unmeasured common effects. The determination of CD
matters methodologically for selecting a proper analysis procedure as
some tests (the first-generation techniques) do not consider CD, while
more recent tests (the second-generation techniques) account for CD.
The efficacy of the available CD tests depends on the comparison of the
numbers of countries (N) and years (T) in the panel. In macro panels
with a few countries (such as G7 and E7 countries) and a relatively long
period, the traditional Lagrange multiplier (LM) test of Breusch and
Pagan (1980) and its bias-adjusted version proposed by Pesaran et al.
(2008) are widely used to control CD for both variables (on series) and
models (on residuals).
When CD is evidenced for variables, the second-generation panel
unit root tests are more efficient. As one of these tests, we employed the
well-proven cross-sectionally augmented Dickey-Fuller (CADF) method
of Pesaran (2007) since it produces efficient results in heterogeneous
macro-panel cases. The CADF procedure is a covariate-augmented
version of the standard Dickey-Fuller regressions. The CADF method
tests the null hypothesis of unit root (non-stationarity) for individual
countries forming the panel. The averages of individual CADF statistics
give the cross-sectionally augmented Im-Pesaran-Shin (CIPS) statistics,
which are used to test the null hypothesis of the presence of homoge­
neous unit roots in whole panels.
When all the modeled variables are non-stationary at level but sta­
tionary in their change terms, i.e., I(1), the traditional model estimates
become inefficient. However, the relationship between first-difference-
stationary variables may be still inspected through cointegration anal­
ysis. The efficacy of the cointegration techniques depends on their
consideration of country heterogeneity which results in heterogenous
slope coefficients. The ANOVA results give some information about the
heterogeneity. Yet, we also employed Pesaran and Yamagata’s (2008) Δ
test under the null hypothesis of slope homogeneity. Pesaran and
Yamagata (2008) propose Δ-tilde and adjusted Δ-tilde tests for slope
homogeneity. The Δ-tilde test is based on the weighted difference be­
tween the country-specific and the pooled estimates, while the adjusted
6
Journal of Environmental Management 347 (2023) 119027
Δ-tilde test statistic adjusts the mean-variance biases.
To detect whether there is a cointegration relationship between the
modeled variables, we adopted the bootstrapped panel cointegration
approach proposed by Westerlund and Edgerton (2007). The
Westerlund-Edgerton method produces a bootstrapped LM statistic to
test the null hypothesis of cointegration. This method builds on the
McCoskey and Kao (1998) LM test. However, addressing that
McCoskey-Kao LM statistic is based on the strict cross-sectional inde­
pendence and very sensitive to serial correlation, Westerlund and
Edgerton (2007) argue that inference based on the asymptotic normal
critical values can be highly deceptive in small samples. Therefore, they
suggest using bootstrap test statistics and critical values by generating
bootstrap samples based on recursions of modified model estimates. We
employed this cointegration test as it has a good small sample perfor­
mance and considers CD by also allowing heteroscedasticity and
autocorrelation.
Furthermore, to check the stability of the model, we also controlled
for multicollinearity problems. The low pairwise correlations are a sign
of the absence of a multicollinearity problem. Yet, we calculated the
variance inflation factors (VIF) to ensure that the model does not suffer
from a serious multicollinearity problem. The VIF value ranges from 1 to
∞. The general rule-of-thumb claims that VIF values should be lower
than 5 (Gregorich et al., 2021), but lower VIF is always better and 1 is
desired most.
In the last step of the analysis, we estimated the constructed model
for the G7 and E7 panels by conducting the augmented mean group
(AMG) estimator (Eberhardt, 2012; Eberhardt and Teal, 2020). The
AMG method is increasingly used in the relevant literature as it in­
corporates heterogeneity and CD concerns and produces reliable results
resilient to exogenous or endogenous regressors (Iqbal et al., 2021; Tao
et al., 2021). The baseline formulation of the panel AMG estimator
(Eberhardt, 2012; Eberhardt and Teal, 2020) adapted to our case is
given in Equation (8).
∑
T
ΔNXCEPCit = η1t + σ i ΔZit + δi UCEi + φt Dt + uit (8)
t=2
In Equation (8), Δ is the difference operator, and Zit includes all six re­
gressors in the model, while the term ƞ1t is the intercept that captures the
heterogeneous time-invariant effect. The unobservable common effect is
denoted by UCEi and δi is heterogeneous factor loadings. The φ term
M. Demiral and Ö. Demiral Journal of Environmental Management 347 (2023) 119027

shows the common dynamic process and Dt denotes time dummies, increase the power of the estimator in differentiating between low and
through which the AMG estimator augments the equation. high GVCs participation.

4. Results and discussion 4.2. Results from pre-estimation tests

4.1. Results from descriptive analysis
Table 1 represents descriptive statistics and pairwise correlations of
variables. The G7 average of NXCEPC is − 1.464, which indicates a net
per capita import of carbon emissions. The E7 average of NXCEPC is
0.414, which reveals that the E7 group is a net carbon exporter. These
results support hypothesis 1. The G7 sample has a revealed comparative
export advantage in high-tech products, while the E7 has a revealed
comparative export advantage in resource-intensive products as the
group means are greater than 1. The G7 group’s mean value of XPCI
(9.879) is quite smaller than that (14.805) of the E7 group. A large gap
between the G7 and E7 groups is observed in GDPPC that the G7
countries are among the high-income countries, while the E7 countries
are mostly among mid-income countries.
Significant correlations show that NXCEPC is positively correlated
with BPGVC, RCARI, and XPCI but negatively correlated with FPGVC
and RCAHT in the G7 case. For the E7 sample, NXCEPC is negatively
correlated with BPGVC and RCARI, while it is positively correlated with
FPGVC and XPCI. Notably, the correlation between NXCEPC and GDPPC
is weak and insignificant for both groups, which is not a common
observation between total carbon emissions and gross GDP data. This
weak correlation indicates the potential contribution of economic
growth to the decoupling of exports from carbon emissions.
Results from the between-groups comparisons of the ANOVA F-test
reported in Table 2 show significant heterogeneities between the G7 and
E7 groups in the considered variables except for GVCs participation.
These findings support hypothesis 2.
The similarity of GVCs participation levels of the groups helps in
capturing the actual impacts of the countries’ positions in GVCs without
a level effect. The country heterogeneities within the groups are also
statistically confirmed by the within-group ANOVA F-test statistics.
These findings reveal that group members’ levels are different from their
groups’ averages in all variables. The within-groups heterogeneities
Table 3 represents results from the CD and unit root tests for vari­
ables. The Breusch-Pagan LM test statistics reject the null hypothesis of
no CD. The CIPS panel unit root test results reveal that all variables
follow a first-difference stationary process, which indicates an integra­
tion order of one, i.e., I(1).
The results from model specification and cointegration tests are re­
ported in Table 4. The model specification statistics show that the con­
structed final model contains heterogeneous slope coefficients and cross-
sectionally dependent errors (uit is correlated across countries). Coin­
tegration test results indicate that the modeled variables are cointe­
grated. Furthermore, the VIF values of regressors reveal the absence of a
serious multicollinearity issue.
4.3. Results from model estimate
The long-run AMG estimations for G7 and E7 samples are reported
comparatively in Table 5.
The results reveal that BPGVC is significantly and positively associ­
ated with NXCEPC for both G7 and E7 samples, despite lower magni­
tudes in the E7 case. This implies that increasing value-added inputs that
the G7 and E7 countries import from other countries intensify their
NXCEPC. These findings support that of Chen et al. (2022), Ma et al.
(2022), Qian et al. (2022), and Tang et al. (2022). While FPGVC and
NXCEPC are negatively associated in the G7 sample, the nexus is positive
for the E7 sample. This evidence indicates that domestic value-added
exported to other countries tends to reduce the per capita net carbon
exports in G7 countries, whereas, on the contrary, it tends to increase the
per capita net carbon exports in E7 countries. These results are consis­
tent with that of Hertwich (2020), Duan et al. (2021), Shi et al. (2022),
and Tang et al. (2022). The evidence, however, contradicts that of Ye
et al. (2020), who found that forward GVCs participation decreased
carbon intensity for developing countries but the nexus was positive for
developed countries. Overall, our findings validate hypothesis 3 while

Table 1
Descriptive statistics and pairwise correlations.
Descriptive statistics: G7 panel

NXCEPC BPGVC FPGVC RCARI RCAHT XPCI GDPPC

Mean − 1.464 17.756 20.245 0.931 1.086 9.879 38.307

Max. 2.105 27.895 28.322 1.446 1.673 17.792 59.491
Min. − 3.338 6.034 9.512 0.519 0.545 5.152 29.084
Std. dev. 1.095 5.587 4.315 0.190 0.318 2.966 7.021
Pearson correlations: G7 panel
NXCEPC 1 0.560*** − 0.743*** 0.579*** − 0.492*** 0.381*** − 0.099
BPGVC 1 − 0.594*** 0.368*** − 0.533*** − 0.031 − 0.235***
FPGVC 1 − 0.572*** 0.642*** 0.099 0.224***
RCARI 1 − 0.537*** 0.143* 0.479***
RCAHT 1 0.120 0.067
XPCI 1 0.133*

Descriptive statistics: E7 panel

NXCEPC BPGVC FPGVC RCARI RCAHT XPCI GDPPC

Mean 0.414 17.383 19.150 1.353 0.656 14.805 5.816

Max. 4.694 35.919 38.844 3.926 1.689 38.240 12.004
Min. − 0.802 7.285 7.554 0.372 0.196 6.783 0.631
Std. dev. 1.103 7.876 7.401 0.740 0.449 7.661 3.227
Pearson correlations: E7 panel
NXCEPC 1 − 0.425*** 0.677*** − 0.195** 0.006 0.797*** 0.045
BPGVC 1 − 0.675*** − 0.461*** 0.648*** − 0.349*** 0.226***
FPGVC 1 0.252*** − 0.488*** 0.778*** 0.061
RCARI 1 − 0.576*** − 0.124 − 0.556***
RCAHT 1 − 0.242*** 0.163**
XPCI 1 0.149**

Note: ***, **, and * denote the statistical significance of the correlations at 1%, 5%, and 10% levels, respectively.

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M. Demiral and Ö. Demiral Journal of Environmental Management 347 (2023) 119027

Table 2
Results from within-group and between-group ANOVA.
G7 sample Means

NXCEPC BPGVC FPGVC RCARI RCAHT XPCI GDPPC

Canada 0.815 24.473 12.811 1.274 0.706 13.724 39.975
France − 1.696 21.398 19.294 0.820 1.333 8.125 34.835
Germany − 1.577 19.901 21.528 0.890 1.150 9.522 37.170
Italy − 1.710 20.550 17.470 0.891 0.634 5.381 31.651
Japan − 1.905 11.606 25.688 0.690 1.441 13.331 32.234
U.K. − 2.050 16.156 21.778 0.893 1.066 10.407 40.887
U.S.A. − 2.123 10.206 23.148 1.056 1.273 8.666 51.397
F-stat. (within G7) 82.546* 92.077* 120.112* 134.864* 118.303* 149.175* 109.161*
G7 group mean − 1.464 17.756 20.245 0.931 1.086 9.879 38.307

E7 sample Means

Brazil − 0.148 11.524 19.824 1.984 0.3516 3.190 7.792

China 0.639 18.539 16.061 0.907 1.3639 1.375 4.551
India 0.055 16.809 16.267 1.923 0.3973 2.090 1.132
Indonesia 0.032 15.258 23.674 2.356 0.3477 1.642 2.523
Mexico − 0.187 33.434 9.860 0.445 1.2866 1.233 8.912
Russia 2.888 8.759 32.865 0.972 0.4423 4.627 7.518
Türkiye − 0.383 17.359 15.498 0.882 0.4022 1.304 8.284
F-stat. (within E7) 293.424* 168.908* 160.485* 121.971* 238.154* 234.454* 97.911*
E7 group mean 0.414 17.383 19.150 1.353 0.656 14.805 5.816
F-stat. (between G7 and E7) 245.202* 0.250 2.746 51.346* 102.47* 60.409* 2970.434*

Note: * denotes the statistical significance of the compared mean differences at the 1% level.

Table 3 Table 4
Results from cross-sectional dependence (CD) and unit root tests for variables. Results of model specification and cointegration tests.
Control→ CD (H0: No CD) Inference Control↓ Tests↓; Sample→ G7 E7

Test→ Breusch-Pagan LM Homogeneity. H0: Pesaran-Yamagata 6.216*** 7.044***

Homogenous slope ̃
Δ (0.000) (0.000)
Sample→ G7 E7
coefficients Pesaran-Yamagata 7.863*** 8.627***
NXCEPC (54.941)*** [51.246]*** (52.359)*** [51.211]*** CD exists adj. Δ
̃ (0.000) (0.000)
BPGVC (52.343)*** [53.713]*** (37.387)** [40.570]*** CD. H0: No CD in the Breusch-Pagan LM 124.429*** 60.818***
FPGVC (48.685)*** [55.979]*** (45.271)*** [43.096]*** model (0.000) (0.000)
RCARI (51.932)*** [60.426]*** (42.482)*** [37.607]** Pesaran-Ullah- 15.187*** 10.902***
RCAHT (46.427)*** [48.123]*** (48.259)*** [51.202]*** Yamagata bias- (0.000) (0.000)
XPCI (51.000)*** [52.964]*** (37.562)** [38.550]** adjusted LM
GDPPC (61.268)*** [61.261]*** (36.380)** [38.389]** Cointegration. H0: Westerlund- 2.554 (0.362) 0.766
Control→ Stationarity at level (H0: Unit root) Cointegration exists Edgerton bootstrap (0.853)
Test→ CIPS LM
G7 E7 Multicollinearity. VIF BPGVC 1.033 1.373
values of regressors FPGVC 1.067 1.400
NXCEPC (–1.247) [–2.046] (–1.456) [–1.428] Not I(0) RCARI 1.050 1.463
BPGVC (–1.345) [–1.139] (–1.576) [–1.298] RCAHT 1.064 1.352
FPGVC (–0.935) [–1.090] (–0.816) [–1.200] XPCI 1.024 1.169
RCARI (–1.960) [–2.538] (–1.358) [–1.643] GDPPC 1.060 1.196
RCAHT (–0.734) [–1.446] (–1.093) [–0.910]
XPCI (–1.892) [–2.324] (–1.637) [–1.727] Note: Statistics are from the final model (specification iv). Findings from all
GDPPC (–1.089) [–1.860] (–1.356) [–1.140] specifications are consistent. Because the trend is statistically insignificant, the
Stationarity at first-difference (H0: Unit root) reported results are from the detrended specification. Probabilities are in (). ***,
NXCEPC (–3.260)*** [–3.322]*** (–2.673)*** [–3.543]*** I(1) **, and * denote the rejection of the null hypothesis at 1%, 5%, and 10% levels,
BPGVC (–2.575)** [–3.559]*** (–3.062)*** [–3.466]*** respectively.
FPGVC (–2.419)** [–3.437]*** (–2.295)* [–3.214]***
RCARI (–4.298)*** [–3.806]*** (–2.811)*** [–3.394]***
RCAHT (–2.523)** [–3.343]*** (–3.217)*** [–3.324]*** inferred that higher export competitiveness in resource-intensive sectors
XPCI (–5.141)*** [–4.439]*** (–3.884)*** [–3.809]*** may reduce the net carbon exports. Herein, the distinction between
GDPPC (–2.363)** [–2.903]** (–2.534)** [–3.970]*** upstream (exploration and production of raw resources) and down­
Note: Detrended and trended test statistics are in () and [], respectively. ***, **, stream (procession of resources) export activities is important as the
and * denote the rejection of the null hypothesis at 1%, 5%, and 10% levels, environmental awareness in the former is likely to be higher (Isil and
respectively. Sebastianelli, 2020). A similar pattern is observed in the relationships
between RCAHT and NXCEPC such that the G7 sample has relatively
hypothesis 4 is partially supported. higher export competitiveness in high-tech products compared to the E7
In addition, we found a positive association between RCARI and sample and has a negative RCAHT-NXCEPC nexus against a positive
NXCEPC in the case of G7, while the link is negative for the E7 case. The RCAHT-NXCEPC nexus in E7.
positive nexus in the G7 group is in line with the results of Li et al. The comparisons of the RCAHT levels and their net carbon export
(2021a) and Wang et al. (2023a) who showed that natural resource rents effects between the groups indicate the decarbonization contribution of
tended to increase carbon emissions in most cases of the large samples of the technology upgrading in exports with a threshold. This evidence
countries. The evidenced opposite direction in the E7 case reveals the supports the findings of Wang et al. (2021) who showed a dual effect of
country heterogeneity. Given the ANOVA results showing that the G7 technological progress with a threshold for emerging countries. Broadly,
sample has lower RCARI but the E7 sample has higher RCARI, it can be our evidence endorses the findings of He and Xie (2022), who showed a

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M. Demiral and Ö. Demiral Journal of Environmental Management 347 (2023) 119027

Table 5 5. Conclusion
Results from panel AMG estimates (Dependent variable: NXCEPC).
Sample→ G7 panel Recently, it has been argued that the increasing trade in GVCs has
larger environmental costs mainly associated with expanding economic
i ii iii iv
activities and transport operations which cause more carbon pollution
BPGVC 0.179*** 0.075*** 0.072* 0.084** than standard trade. From the global perspective, we showed that the
[0.065] [0.028] [0.042] [0.040]
FPGVC – − 0.086* − 0.112 − 0.132
increasing development of GVCs redistributed not only international
[0.045] [0.075] [0.089] production stages but also production-induced carbon pollution
RCARI – – 0.238** 0.064 [0.590] embodied in trade across countries. The carbon circle embodied in trade
[0.118] within GVCs can threaten global efforts to abate carbon emissions unless
RCAHT − 0.323** − 0.899*
– –
an overall low-carbon transition mechanism is set in GVCs. Global
[0.134] [0.561]
XPCI – – – − 0.008 environmental coalitions should also know that the associations be­
[0.070] tween GVCs and trade-embodied carbon pollution tend to change het­
GDPPC – – – − 0.131*** erogeneously depending on the types of GVCs participation and
[0.034] countries’ characteristics. Therefore, the political treatments for the
Constant − 3.949*** − 1.150 − 0.534 4.328* [2.248]
[0.754] [1.299] [1.756]
environmental progress in international trade need to be differentiated
Wald x 2
7.740*** 10.720*** 15.000*** 24.460*** for developed and emerging countries. In this regard, our group-specific
results put forward the following policy recommendations customized
Sample→ E7 panel
for the G7 and E7 samples.
BPGVC 0.025*** 0.027*** 0.036*** 0.030***
The net carbon importer G7 group might face a carbonization impact
[0.009] [0.008] [0.011] [0.011]
FPGVC – 0.027 [0.017] 0.035* 0.027 [0.018]
from further backward GVCs participation. Governments in these
[0.021] countries need to implement an optimal combination of punitive and
RCARI – – − 0.541** − 0.143 inciting policy instruments to prevent domestic firms from importing
[0.261] [0.182] carbon-loaded inputs. Leading firms in G7 countries should be moti­
RCAHT 0.196 [0.324] 0.160 [0.253]
vated not only to transfer environmental technologies to their suppliers
– –
XPCI – – – 0.008 [0.022]
GDPPC – – – − 0.129*** but also to push the suppliers for higher decarbonization standards.
[0.042] These environmental interactions will help change the GVCs-driven
Constant − 0.353*** − 0.537** − 0.391 − 0.174 carbon leakages to pro-environmental spillovers. As G7 countries tend
[0.080] [0.218] [0.448] [0.877] to import more energy-intensive intermediates and export less energy-
Wald x2 8.470*** 14.190*** 18.550*** 19.900***
intensive intermediates, the renewable energy transition in all compo­
Note: Standard errors are in []. ***, **, and * denote the statistical significance of nents and processes of production in GVCs may help stop the develop­
coefficients at 1%, 5%, and 10% levels, respectively. ment of carbon chains. The evidenced negative association between
forward GVCs participation and net carbon exports prompts alterna­
significant emission reduction effect of high-tech digital GVCs. Agree­ tively to increase the domestic value-added in exports in G7 countries.
ably, Jiang et al. (2021) argue that technology exportation is beneficial Yet, they need to import resource-intensive products, as these countries’
for high-income countries’ global carbon reduction. The evidenced increasing export competitiveness in these sectors tends to retard the
negative nexus between RCARI and NXCEPC in the E7 case upholds the decarbonization trend. More specifically, these countries should
finding of Doğan et al. (2022), who showed that natural resources improve their high-tech export competitiveness, which will support the
boosted the renewable energy demand for developing countries. For the carbon levy. These countries’ economic growth helps cut the net carbon
G7 panel, we found the opposite. In fact, the G7 has a comparative exports. However, in order to achieve the envisaged full decarbon­
disadvantage in resource-intensive exports. Probably these countries ization, they should increase the share of the income assigned to support
have focused on the efficient use of resources in non-resource sectors the development of environmental technologies in all processes of pro­
and leaving the production and export of resource-intensive goods. For duction and export.
the impacts of XPCI, studies explore negative (Bashir et al., 2020; Li For the net carbon exporter E7 group, increases in both the backward
et al., 2021b) or positive (Wang et al., 2020; Iqbal et al., 2021) associ­ participation and forward participation in GVCs tend to increase net
ations between export diversification (the opposite of export concen­ carbon exports. These effects imply expanding trade scale and deep­
tration) and environmental pollution indicators. However, our results ening carbonization in E7 countries’ trade networks. Therefore, the
reveal that the impact of XPCI is small and insignificant for both the G7 firms in these countries should start to reduce the carbon emissions
and E7 samples. embodied in their production and trade by improving the GVCs
Another important finding is the negative association between embedding pattern. The GVCs upgrading includes efficiency improve­
GDPPC and NXCEPC for both panels with a similar magnitude. This ment (process upgrading), production of more sophisticated goods and
evidence indicates that not only G7 countries but also their follower E7 services (product upgrading), acquisition of new functions within GVCs
countries have some improvements in energy efficiency, clean energy (functional upgrading), and movement into less-emitting value chains
transition, and successful decarbonization policies to encourage busi­ (chain upgrading). These environmental upgrades will help E7 countries
nesses to develop and adopt cleaner production technologies. Although in improving the technology adoption, research and development,
these favorable environmental management practices in E7 countries marketing, design, and other high-value-added but low-emission pro­
put great hope for future efforts to create a carbon-neutral world cesses in GVCs.
economy, the carbon-intensifying effects of BPGVC reveal the risk that Besides, E7 countries are increasingly hosting many multinational
the E7 countries might have also found new pollution havens from other enterprises that may be seeking cheaper resources and pollution havens.
developing countries. This evidence contradicts that of many studies This international trade pattern driven by low-skilled labor and an
which find a positive association between GDP and carbon emissions for abundance of natural resources may cause a specialization in carbon-
developed and emerging countries cases (Safi et al., 2021; Iqbal et al., loaded chains in both the backward and forward GVCs participation.
2021; Hao and Chen, 2022), but upholds the argument that this positive Therefore, E7 countries need to shift their GVCs participation from static
association is not a rule for all countries (Narayan et al., 2016), espe­ comparative advantage to dynamic competitive advantage. This tran­
cially when the non-linear associations and country heterogeneities are sition should be accompanied by green competition in GVCs. Thus, they
considered (Li et al., 2021a; Wang et al. 2022, 2023a, 2023b). need to ease the spread of more environmentally-friendly production

9
M. Demiral and Ö. Demiral
techniques which can accelerate environmental innovation and trigger
higher environmental standards.
In addition, governments of E7 countries may also increase penalties
for environmental pollution to stop the carbon leakage mechanisms of
GVCs. These punitive practices should be supported by renewable en­
ergy transition and environmental investments, especially for those
firms in carbon-intensive trade sectors involved in GVCs. Pricing carbon
pollution and stopping fossil-energy subsidies, as well as promoting
renewable energy transition can encourage environmental innovation in
production and export processes. Revenues from carbon pricing may be
used to finance the decarbonization adjustment costs of emissions-
intensive domestic firms embedded in GVCs. The GVCs are closely
linked to the increasing transportation and logistics services, which are
using more energy that is supplied mostly by non-renewable resources in
E7 countries. Thus, low-carbon alternative transportation modes and
logistics services should be improved and made cheaply available in
these countries.
In the E7 panel, strengthening comparative advantage in resource-
intensive sectors reduces net carbon emissions. This finding indicates
that exporting firms even in resource-intensive sectors may get real
environmental benefits from the process upgrading. This evidence may
be explained by the transiting economic structures of emerging coun­
tries and the exports of resource-intensive firms operating in these
countries. These emerging countries use varied contents, including low-
carbon components from different sectors to sustain the high export
competitiveness in resource-intensive sectors. As this implies global
competitiveness is good for the environment, these countries should
improve their comparative advantage toward lower carbon intensity by
adopting environmental management implications even in resource-
based sectors. To support this, the decarbonization pressures imposed
by trade partners from developed countries should be eased through
governments’ financial and technical support. Furthermore, like the G7
case, economic growth in the E7 group leads to a decrease in net carbon
exports. This indicates the income-led expanding capacities to produce
and export low-carbon production contents. While these countries
should improve economic growth through the production of high-value-
added products on the one side, they also need to increase the shares of
domestic income and foreign investments devoted to environmental
projects on the other side.
Addressing their increasing but different participation in GVCs, we
took the G7 and E7 samples to represent the developed and emerging
countries, respectively. However, the evidenced country heterogeneities
even in the groups limit the generalization of the drawn implications for
other countries that are not included in the samples. As we aimed to
capture the possible exchange of lesser and more carbon-intensive
value-added between countries from a broad perspective on the value
chain face of trade, we did not test the relationships for individual
countries. For our purposes, we focused on the overall GVCs participa­
tion with backward and forward participation nuances and thus
considered total sectors by taking the world as the trade partner. Again,
due to the unavailability of coherent multi-country datasets, our study
did not cover the post-2018 period. New studies exploring the re­
lationships between GVCs participation and trade-embodied environ­
mental pollution at the firm, sectoral, and country levels with longer
time coverage will supplement and enrich our evidence.
Author contributions
Özge Demiral: Conceptualization, literature review, methodology,
and results assessment. Mehmet Demiral: Data collection, methodol­
ogy, formal analysis, discussion, writing, and review-editing.
Funding
This work did not receive any external financial support.
10
Journal of Environmental Management 347 (2023) 119027
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
Research Data Used/Analyzed (Reference data) (Google Drive)
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