Is There Evidence of GHG Leakage? Insights from Production and Consumption-Based Accounting

This study examines the existence of greenhouse gas (GHG) emissions leakage within the framework of global value chains (GVCs) by comparing production-based and consumption-based accounting. We contribute to the literature by applying the most recent value-added decomposition methodology developed by Wang et al. (2017) and by using sector-level data from 186 countries across 25 sectors for the period 1990-2023. Our descriptive evidence demonstrates substantial differences between PBE and CBE and reveals the existence of emissions leakage across countries and sectors. Developing countries and upstream sectors appear as net exporters of emissions, while developed countries and downstream sectors emerge as net importers through global value chains. The empirical results demonstrate that GVC participation plays a central role in shaping this difference. The forward GVC participation is positively associated with net emission exports, whereas backward GVC participation is positively related to net emission imports. These findings highlight that emission responsibility cannot be adequately assessed using production-based measures alone. Instead, effective policies should account for consumption-based measures to reach an equitable responsibility-sharing framework in an increasingly fragmented global economy.