The Impact of the Environmental Clauses of Free Trade Agreements on the Hidden Carbon of Developing Countries

Abstract

The environmental provisions covered by free trade agreements (FTAs) are one of the important external factors influencing trade embodied carbon. Based on the rule text of free trade agreements, this paper measures the depth of environmental clauses in free trade agreements between different countries and constructs an environmental clause depth index. Combined with the trade embodied carbon data of 255 different product codes of HS6 from 11 representative developing countries from 2008 to 2017, An empirical exploration is conducted based on the bilateral trade embodied carbon data from the production and consumption ends to explore the impact of the depth of environmental provisions in free trade agreements on trade embodied carbon. According to the empirical research results, it is found that the enhancement of the depth of environmental provisions in trade agreements can significantly reduce the trade embodied carbon at both the production and consumption ends. Heterogeneity analysis indicates that the environmental provisions of trade agreements at different dimensions have significant differences in their effects on promoting carbon reduction in trade. Compared with unilateral agreements, multilateral agreements are more effective in deeply curbing trade embodied carbon emissions through environmental provisions. The deepening of environmental provisions can more effectively reduce embodied carbon emissions in the trade of non-green products. The degree of inhibition of trade embodied carbon emissions by the depth of environmental provisions is more obvious when the importing country is a developing country. These conclusions can provide empirical evidence and decision-making references for developing countries to identify trade embodied carbon risks, strive for reasonable emission reduction space, and guide the green transformation of industries, helping them balance trade development and carbon emission governance.