Has processing trade made China's exports cleaner? A regional level analysis

Highlights: • The EIE for most regions firstly significantly increased from 2002 to 2007, and then decreased from 2007 to 2012. • Processing exports play a key role in EIE changes. Their changes increased EIE first and then decreased it. • The effect of input structure is dominant in the total effect of processing exports, with other factors played limited roles. • The different change in the commodity structure of intermediate inputs is the main reason for different performances of EIE before and after the crisis. • The increasing interregional trade has exacerbated the regional inequality in terms of environmental cost from exports. This paper investigates the role of processing trade on China's regional CO2 emission intensity of exports (EIE). We investigate the temporal changes in regional EIEs and their determinants from 2002 to 2012 by using special multi-regional input-output tables that distinguish the production of processing exports from other production at the regional level. By using structural decomposition analysis, we attribute the regional EIE changes into effects of very detailed components, which show the roles of different production types and factors in EIE changes. We find that EIE increased from 2002 to 2007 but decreased from 2007 to 2012. In this regard, processing exports play a decisive role in the first period, making China's exports dirtier, but help exports be cleaner after the crisis. By factor, the input structure reflected by the inter-industry production linkage is the main reason for the different performances of EIEs in the two periods. The interregional trade in intermediate inputs has increased most inland regions' EIEs while decreasing coastal regions' EIEs.