Decarbonisation and specialisation downgrading: The double harm of GVC integration

This study explores the double harm of Global Value Chain (GVC) integration by analysing the link between the international division of productive activities and emissions. Methodologically, we propose a framework to disentangle the developmental and sectoral origins of CO2 emissions within GVCs. By providing a granular decomposition of domestic and foreign contributions, we identify foreign backward linkages as the primary carriers of CO2 emissions along GVCs, surpassing domestic inputs in their CO2 footprint. From a within-country perspective, we examine how a country’s internal production structure shapes CO2 emission profiles across development stages, shedding light on the interplay between economic growth and environmental sustainability. At the cross-country level, we analyse how the changing geography of production, and the ensuing sectoral specialisation, impacts global emissions. The relocation of low-tech and natural resources-based productions to developing countries via GVCs has jointly amplified worldwide emissions and reinforced patterns of industrial and ecological downgrading for developing nations. Implications of our findings entail the coupling of environmental, trade and industrial policies.