International trade,carbon leakage,and CO2 emissions of manufacturing industry

Foreign trade drives China’s growth, but as the trade scale continues to expand, the carbon emissions also increase quickly. Based on the industry panel data from 1996 to 2010, this paper calculates carbon emissions of 27 manufacturing industries. According to the intensity of carbon emissions, this paper divides the manufacturing sectors into low carbon and high carbon manufacturing industry and then analyzes the carbon emission trends. Next, the paper uses the feasible generalized least square regression to verify the existence of environmental Kuznets curve (EKC) of the manufacturing industry’s carbon. In order to investigate the carbon leakage problem, the regression also includes the interaction term between trade and industrial value added. Our findings are as follows: the carbon emissions of the whole manufacturing industry and low carbon manufacturing industry accord with the EKC curve, but have a linear relationship with the high carbon manufacturing industry; trade reduces the carbon emissions of the whole manufacturing industry and low carbon manufacturing industry, but it increases those of the high carbon manufacturing industry; for the whole manufacturing industry and low carbon manufacturing industry, there is no carbon leakage, but it exists in the high carbon manufacturing industry. On the whole, pollution haven hypothesis does not hold up in China, and China does not need to limit industry foreign trade to reduce the emission of CO₂. But the manufacturing industry will still be the main engine of the economic growth, and therefore our country should make an effective low-carbon policy, introduce advanced technology, increase R&;D investment into low-carbon technologies, and upgrade and transform the original equipment to change the backward mode of production.