Can Service Trade Effectively Promote Carbon Emission Reduction?—Evidence from China

Carbon emissions have become a global issue of increasing concern due to their detrimental impact on the environment. Efforts to combat rising emissions have been taken globally. Despite China’s commitment to globalization, policymakers have faced challenges in adequately addressing this pressing issue. This paper aims to fill this gap by exploring a specific aspect of international trade, namely service trade. We theoretically analyzed the impact of service trade on carbon emissions and then empirically examined the impact using panel data from 2009 to 2019 of 30 provincial regions in China. Specifically, a non-linear model was used to capture the direct effect, particularly the potential non-linear relationship; a mediating effect model was applied to investigate the indirect effects; and a panel quantile model was adopted to examine the heterogeneity of the impact across different levels of carbon emissions. The research revealed: (1) The impact of service trade on carbon emissions exhibits a non-linear characteristic with a significant inverted U-shaped relationship being evident, indicating that the development of service trade can ultimately contribute to carbon reduction; (2) service trade can directly impact carbon emissions through its scale effect, while mechanism analysis showed that service trade can indirectly affect carbon emissions through its technological and structural effects, with carbon emission reduction also relying on these mechanisms; (3) There is significant heterogeneity in the impact of service trade on carbon emissions across geographic regions and at different levels of carbon emissions in China.