Environmental effects of growth and global value chains: The case of East and Southeast Asian economies

Abstract

The Environmental Kuznets Curve (EKC) hypothesis has become an important topic in the literature on the effects of growth on the environment, albeit surrounded by some controversy and nuance. Although this hypothesis has been analyzed in the literature in multiple ways and using different variables, there is still a gap in the consideration of global value chains (GVCs), which delve into the international division of production. This is particularly important in the intermediate stages of production, as they include tasks with a greater environmental impact. This research aims to analyze the environmental effects of economic growth and foreign trade linked to GVCs in a sample of 12 countries of East and Southeast Asia, given their strong insertion in GVCs. Based on the EKC, variables such as GDP per capita, environmental impact, and renewable energy consumption are incorporated. As a novelty, the research also includes GVCs participation and position indexes, and different measures of CO2 emissions. Our results confirm the existence of a nonlinear relationship between economic activity and its environmental effects, although with important nuances depending on the mode of insertion of each country in GVCs. In this sense, although all the selected countries increased their total emissions, substantial disparities are observed depending on the perspective considered (producer, consumer, and exports). Ultimately, it is concluded that, for an effective reduction of the environmental impact in these countries, it is essential to design policy measures, targeting new technologies, consumption and production patterns, and attracting green foreign direct investment.