Air pollution embodied in China’s trade with the BR countries: Transfer pattern and environmental implication

Journal Pre-proof Air pollution embodied in China’s trade with the BR countries: transfer pattern and environmental implication

Changsheng Li, Bihua Liu PII:

S0959-6526(19)33996-4

DOI:

https://doi.org/10.1016/j.jclepro.2019.119126

Reference:

JCLP 119126

To appear in:

Journal of Cleaner Production

Received Date:

11 June 2019

Accepted Date:

31 October 2019

Please cite this article as: Changsheng Li, Bihua Liu, Air pollution embodied in China’s trade with the BR countries: transfer pattern and environmental implication, Journal of Cleaner Production (2019), https://doi.org/10.1016/j.jclepro.2019.119126

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Journal Pre-proof Air pollution embodied in China’s trade with the BR countries: transfer pattern and environmental implication Changsheng Li1,2,*, Bihua Liu1 1. School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China. 2. Institute of Climate Change and Energy Sustainable Development, Qingdao University of Science and Technology, Qingdao 266061, China. * Correspondence: [email protected]; Tel/Fax: +86 532 88958952

Abstract: Knowledge about environmental load displacement and its effects of China’s trade with the Belt and road (BR) countries will help develop coordinating policies to jointly promote green development in the regions. This paper presents an empirical study on embodied air pollution displacement of China-BR trade by employing a multiregion input-output model. Embodied air pollution trade and its transfer pattern, as well as the driving force for changes in China’s trade embodied air pollution intensity, are investigated. We found that, in the period of analysis, embodied air pollution displacement between China and the BR countries was aggravated and China was in embodied air pollution trade surplus. Most net transfer mainly came from its energy importers with better air quality and higher Human Development Index. This indicated that the net embodied air pollution transfer from the BR countries to China would not bring significant environmental and sustainability impacts on those suppliers. However, 1

Journal Pre-proof embodied air pollution flowed from the BR countries to China decreased the overall environmental performance and efficiency. Decomposition analysis showed technology effect served the main force driving force for the drops in China’s trade embodied air pollution intensity. The findings are beneficial for policymakers of the BR countries to take measures to promote their sustainable development.

Keywords: Embodied air pollution; MRIO; the BRI; Environmental implication; LMDI 1. Introduction Since the Belt and Road Initiative (BRI) was proposed by China, the flow of goods and services between China and the BR regions has witnessed rapid growth. The goods trade volume has surpassed 6 trillion U.S. dollars from 2013 to 2018 and its share in China’s total foreign trade volume has increased from 25% in 2013 to 27.4% in 2018(OLGPBRI, 2019). The growing flow of goods and services in the BR regions adds increasing concern for the environmental load displacement and its effects among environmental non-governmental organizations, and researchers (Li et al., 2015; The Swedish Trade & Invest Council, 2018; Tracy et al., 2017; UN, 2019; UN Environment, 2017; Wang and Wang, 2017). The environmental load displacement and its effects of international trade have been a hot topic in the trade-environment nexus research field over past decades. However, existing studies find conflicting evidence about their impacts(Balogh and 2

Journal Pre-proof Jambor, 2017; Cole, 2006) (Antweiler et al., 2001; Copeland and Taylor, 1994; Frankel and Rose, 2005; Gozgor, 2017; Guan et al., 2014; Managi et al., 2008, 2009; Ståhls et al., 2011; Yasmeen et al., 2018; Zhang, 2018; Zhang, S. et al., 2017). With regard to research perspective, embodied flows, such as virtual water, embodied energy, embodied CO2 flow, and embodied air pollutants, have been widely employed to environmental degradation caused by international trade by many researchers (Cazcarro et al., 2016; Chapagain and Hoekstra, 2011; Hui et al., 2017; Kinna, 2016; Wakeel et al., 2017; Wan et al., 2016; Zhang, W. et al., 2018; Zhao et al., 2015; Barrett et al., 2013; Bo et al., 2018; Dolter and Victor, 2016; Meng et al., 2018; Peters et al., 2011; Wang and Jiang, 2019; Wang et al., 2019; Wang and Zhou, 2019b) With the rapid growth of the trade flow of goods and services between China and the BR regions, its environmental load displacement and effects have become an increasing research topic in recent years. Several studies have attempted to investigate their environmental effects from a perspective of embodies flow. For instance, Zhang, Y. et al. (2018) investigated the environmental effects of agricultural products trade among the BR countries from the perspective of virtual water. They founded that although China was in virtual water trade surplus with the countries along the Belt and Road, more than 40 spanning countries were in virtual water trade surplus with China and helped ease their water shortages. Han et al. (2018) studied embodied carbon flows in the Belt and Road regions. They found that the BR regions were net suppliers of embodied carbon to developed countries. 3

Journal Pre-proof Air pollution serves the biggest environmental risk to public health. However, environmental load displacement and effects of China-BR trade, from the perspective of embodied air pollution, have received little attention. This paper will address this issue by adopting a MRIO based on EORA database. The embodied air pollution transfer among nations and sectors, and its effects on efficiency, environmental pressures, and sustainability are comprehensively examined. The key findings of this article are: First, the embodied air pollution displacement between China and the BR regions is aggravated. Second, China ran the surplus of embodied air pollution trade with the BR. Most of the net transfer mainly comes from China’s energy importers with better air quality and a higher Human Development Index(HDI). Third, net embodied air pollution flows from the BR countries to China decreased the overall efficiency. Lastly, the technology effect served as the main force driving China trade with the BR countries in a greener way. To the best of my knowledge, this is the first empirical study on air pollution displacement and its effects of China’s trade with the BR countries. The contributions of this paper are twofold: it enriches the research on the BR by investigating air pollution displacement and its effects of China-BR trade. Second, the paper provides policy insights for policymakers to develop coordinating policies shaping a sustainable BRI.

4

Journal Pre-proof The remainder of this paper is organized as follows. Section 2 introduces the methodology. Results and analysis are presented in section 3. Conclusion and policy implication is provided in the last section. 2. Methods and material 2.1 Methods 2.1.1 MRIO model Due to its heterogeneity hypothesis, the ability capturing the re-export and feedback effect, and tracking the economic relationships among different regions and sectors(Zhang, Z. et al., 2017), multi-region input-output (MRIO) models have been widely used to analyze embodied flows(Moran and Kanemoto, 2016; Peters and Hertwich, 2008; Wang et al., 2017; Yu et al., 2014; Zhao et al., 2015). The key equation is intermediate consumption plus final demand equates to total economic output. In a world consisting of m regions with n sectors, the key equation for Sector i in region r is expressed as: 𝑚

𝑛

𝑚

𝑠 𝑟𝑠 𝑥𝑟𝑖 = ∑𝑠 = 1∑𝑗 = 1𝑎𝑟𝑠 𝑖𝑗 ·𝑥𝑗 + ∑𝑠 = 1𝑓𝑖𝑖 (r,s=1,2,…m; i,j=1,2…n)

(1)

Here, 𝑥𝑟𝑖 is the gross output of Sector i in Region r, 𝑎𝑟𝑠 𝑖𝑗 , the so-called technical coefficient, represents the intermediate input demand for the output of Sector i in Region r per unit of output of Sector j in Region s, and 𝑓𝑟𝑠 𝑖𝑖 represents Region s’ final demand for the output of Sector i in Region r. Equation (1) can be expressed in the form of a matrix as: X = AX + F = (𝐼 ― 𝐴) ―1𝐹 = 𝐿𝐹 5

(2)

Journal Pre-proof 𝑟𝑠 Where X = [𝑥𝑟𝑖]𝑚𝑛 × 1, A = [𝑎𝑟𝑠 𝑖𝑗 ]𝑚𝑛 × 𝑚𝑛, F = [𝑓𝑖𝑖 ]𝑚𝑛 × 𝑛, L is a Leontief inverse

matrix (mn×mn). Identifying

𝑒𝑟𝑖 as the emission intensity of Sector i in Region r and diagonal

matrix 𝐸 = [𝑒𝑟𝑖]𝑚𝑛 × 𝑚𝑛，then global embodied air pollution flows can be represented by 𝐸𝑚 (mn×m) as Equ. (3): (3)

𝐸𝑚 = 𝐸𝐿𝐹

According to Equ. (3), embodied flows of the six air pollutants between China and BR countries can be obtained and thus the emissions embodied in their imports(EEI) and exports(EEX). The difference between EEI and EEX (Muradian et al., 2002), termed as the balance of emission embodied in trade(BEET) reflecting its net embodied air pollution transfer and environmental effect of trade. In order to obtain the embodied pollution intensity of the import(IIM) and export(IEX), whose changes can reveal the green degree of China’s trade with the BR countries, six air pollutants are converted into pollution equivalents by dividing by their respective equivalent values. IEX and IIM can be obtained from Equ. (4) and Equ. (5), respectively. 𝐼𝐸𝑋 = 𝐼𝐼𝑀 =

∑𝑃𝐸𝑗/𝑃𝐸𝑉𝑗

(j=1,2,…,6)

𝐸𝑋

∑𝑃𝐸𝑗/𝑃𝐸𝑉𝑗

(j=1,2,…,6)

𝐼𝑀

(4) (5)

Where, 𝑗 is the type of pollutants, 𝑃𝐸𝑗,𝑃𝐸𝑉𝑗, 𝐸𝑋, and 𝐼𝑀 represent pollutant emission, conversion coefficient, export, and import, respectively. 2.1.3 Index decomposition method 6

Journal Pre-proof Due to a number of desirable attributes, LMDI method has been widely used in energy and environment research fields(Chong et al., 2017; Mousavi et al., 2017; Torrie et al., 2016; Wang et al., 2014; Wei et al., 2016). For a perfect decomposition and simpler formula, this paper adopts the LMDI-I method to study the forces driving the changes in embodied pollution intensity of China’s trade with the BR countries. The total effect is decomposed into the trade sector structure effect(DS), technological progress effect(DT), and pollutant structure effect (D P ). 𝐼𝐸𝑋 =

𝐸𝐸𝑋 𝐸𝑋

𝐸𝑋 𝑖 𝐸𝐸𝑋 𝑖 𝐸𝐸𝑋 𝑖𝑗

= ∑ 𝑖 ∑ 𝑗 𝐸𝑋

= ∑ 𝑖 ∑ 𝑗 𝐼𝐸𝑋 𝑖𝑗 = ∑ 𝑖 ∑ 𝑗 𝑆 𝑖 𝑇 𝑖 𝑃 𝑖𝑗

𝐸𝑋 𝑖 𝐸𝑋𝑋 𝑖

(6)

𝐼𝐸𝑋 𝑡

(7)

𝐷 𝑡𝑜𝑡 = 𝐼𝐸𝑋 0 = 𝐷(𝑆) ∗ 𝐷(𝑇) ∗ 𝐷(𝑃) 𝑆 𝑡𝑖

(8)

𝐷 𝑆 = exp ( ∑ 𝑖 ∑ 𝑗 𝑤 𝑖𝑗 ln ( 𝑆 0)) 𝑖

𝑇 𝑡𝑖

(9)

𝐷 𝑇 = exp ( ∑ 𝑖 ∑ 𝑗 𝑤 𝑖𝑗 ln ( 𝑇 0)) 𝑖

𝑃 𝑡𝑖𝑗

𝐷 𝑃 = exp ( ∑ 𝑖 ∑ 𝑗 𝑤 𝑖𝑗 ln ( 𝑃 0 )) 𝑖𝑗

(10)

Where, 𝐿(

𝐸𝐸𝑋 𝑡𝑖𝑗 𝐸𝑋 𝑡

，

𝑤 𝑖𝑗 = 𝐿(𝐼𝐸𝑋 𝑡 𝐿(𝑎,𝑏) =

{

𝐸𝐸𝑋 0 𝑖𝑗 𝐸𝑋 0

,)

(11)

， 𝐼𝐸𝑋 0)

𝑎―𝑏 𝑙𝑛 (𝑎) ― 𝑙𝑛 (𝑏)

𝑎≠𝑏 𝑎=𝑏

𝑎

(12)

Here, Subscripts t and 0 are reporting period and base period, respectively. 2.2 Countries along the Belt and Road The BRI, proposed by China in 2013, aims to boost trade and economic growth across Asia and beyond by promoting cooperation and development. As an open, inclusive, and new models of international cooperation and global governance, the 7

Journal Pre-proof active participation of all countries is welcome(Zhang, Y. et al., 2018). More than 130 countries have signed the BRI cooperation agreements with China by the end of 2018. Its boundary has expanded to Asia, Europe, Africa, and Latin America. For easy analysis, we still set out scope for its original 65 spanning countries1. 2.3 Data sources and processing In the past few decades, several MRIO tables have been built by different organizations. The representative MRIO tables mainly include Economic Co-operation and Development (OECD) database, the World Input-Output Database (WIOD), GTAP(Global Trade Analysis Project) database, and the Eora database. Compared to other databases, the Eora database is the most detailed global scale MRIO database by now, covering 189 individual economies, features a 26-sector harmonized industrial classification, and has longer periods of time(Lenzen et al., 2012). Furthermore, the database provides satellite accounts for energy use and environmental pollution, which is suitable to analyze embodied regional pollution transfers and their impacts on countries along the Belt and Road. All data used in this paper are derived from the Eora database from 2010 to 2015. The respective equivalent values for six air pollutants came from the Environmental Protection Tax Law of the People's Republic of China2.

1

Timor and Palestine are not include in EORA database.

2

The PEVs of CO, NOx, NMVOC, NH3, SO2, and PM10 are 6.70, 0.95, 0.95, 9.09, 0.95, and 4.00, respectively.

Due to no NMVOC’s PE, PE of VOCs(volatile organic compounds) is a proxy for NMVOC. Source: Environmental Protection Tax Law of the People's Republic of China, 8

Journal Pre-proof 3. Result and analysis 3.1 Transfer and its pattern As shown in Fig.1, China was in embodied air pollution trade surplus with the BR regions. China’s EEX to the BR countries decreased from 4.32 million tones of air pollution equivalent (APE) in 2010 to 4.00 million tones APE in 2015. While China imported embodied air pollution from the BR regions increased from 5.92 million tones APE in 2010 to 6.45 million tones APE in 2015. The surplus increased from 1.60 million tons APE in 2010 to 2.45 million tons APE in 2015. 20.0

EEX (Mt APE)

5.0

14.3

13.7

12.4

11.6

11.5

15.0 10.0

3.0 4.3

4.6

4.4

4.3

4.2

4.0

1.0

5.0 0.0

Intensity of EEX (Kt APE/billion USD)

17.6

5.0

1.0

EEI (Mt.APE)

3.0

5.9

5.0

6.7

6.7

20.8

18.9

19.5

20.2

6.5

6.8

6.8

20.1

15.0 20.0 25.0

25.0 7.0

Intensity of EEI (Kt APE/billion USD)

10.0

30.0 2010

2011

2012 EEX

2013 EEI

2014 IEX

2015 IIM

Fig.1 Embodied air pollutant flow and its intensity between China and the BR countries

Regarding the changes in their intensity, China’s IEX and its IIM had dropped dramatically from 2010 to 2015. Fig.1 showed that China’s IEX dropped from 17.6 to 11.5 Kt.APE/billion.USD decreased by 34.2%. On the other hand, China’s IIM from 9

Journal Pre-proof the BR countries decreased by 19.7% from 25.0 Kg.APE /billion USD in 2010 to 20.1 Kg.APE/billion USD in 2015. Six embodied individual air pollutants had experienced a similar course with the total embodied pollution. As shown in Fig. 2, China exported six embodied pollutants to the BR countries that had achieved significant reductions. NH3 decreased from 0.24 Kt to 0.21 Kt with the largest drop of 16.23% followed by NOx and SO2 with a decrease of 7.50% and 7.49%, respectively. While the growth rates of six embodied pollutants exported from the BR countries to China vary from 7.7% to 11.2%. CO led the increase with a growth rate of 11.21% and amounted to 6.9 million tons in 2015. Regarding changes in the IEXs of six embodied pollutants, the decline rate varies from 33.32% to 40.67%. Embodied NH3 in China’s export to the BR countries has witnessed the largest drop by 40.67%. With regard to changes in the IIMs of six embodied pollutants, the largest drop occurs to NOx with a decrease of 20.73%. Continuously decreasing China’s IEX and IIM indicated that China’s trade with the BR countries is undergoing a more environmental-friendly way. The fast decline rate of the IEXs of China was attributed to its ambitious air pollutant measurements. For example, China’s government released its toughest plan to combat air pollution in 2013 known as ‘Air Pollution Prevention and Control Action Plan’. Compared with 2010, emissions of NH3, SO2 and NOx decreased by 18.0%, 13.0% and 18.6% in 2015 (MEP, 2015).

10

6.0

20.0

16.3 10.8

4.0

7.6

2.0

5.0 3.2

EEX

EEI

IEX

IIM

4.3

2.1

2.8

0.6

1.0

2.2

15.0 10.0 1.5 5.0 0.0

0.0

Intensity of EX (Kt/billion USD)

EEX (MKt)

Journal Pre-proof

5.0 6.7

9.2

4.0

3.4

4.9

5.4

2.7

4.6

3.7 10.0

7.4

15.0 20.0

EEI (Mt.)

21.3

6.0

25.0

8.0

26.1

30.0

NOx

NH3

2015 2014 2013 2012 2011 2010

NMVOC

2015 2014 2013 2012 2011 2010

2015 2014 2013 2012 2011 2010

SO2

2015 2014 2013 2012 2011 2010

2015 2014 2013 2012 2011 2010

2015 2014 2013 2012 2011 2010 CO

Intensity of EEI (Kt/billion USD)

2.0

PM10

Fig. 2. Six embodied pollutants and their intensity in China’s trade with the BR counties

For the national level, generally, the direction of net embodied air pollution transfer is opposite to the net trade flows. More than 40 BR countries were in embodied air pollution trade deficit with China. Six of the ten top embodied air pollution exporters were in trade surplus with China. These countries mainly included Kazakhstan, Russia, Indonesia, Oman, Mongolia, Philippines, and Saudi Arabia(see Fig. 3a) and their embodied air pollution trade deficit accounted for about 72% of the total. The trade surplus of Russia’s amounted to 29.4 billion USD in 2015. About one-third of the BR countries, including Turkey, Montenegro, UAE, Singapore, Bangladesh, Romania, Czech Republic, Slovakia and among others, were in embodied air pollution trade surplus with China (see Fig. 3b). While eight of the ten

11

Journal Pre-proof top net embodied air pollution importers were in trade deficit with China. For example, Turkey’s trade deficit with China amounted to 11.96 billion dollars in 2015. Another remarkable feature of net embodied air pollution trade between the BR countries and China is that net embodied air pollution was mainly transferred from energy exporters. Seven of the ten top embodied air pollution exporters to China were its key fossil energy suppliers in the BR regions. For instance, Russia, Saudi Arabia, and Oman are key to China’s crude oil importers. The imported crude oil from the above three countries accounted for 34.88% of China’s total imported crude oil in 2018. Mongolia, Indonesia, and Philippines serve as the key coal suppliers. While Kazakhstan is one of the natural gas suppliers of China. Fossil energy mining and processing consumed primary energy and emitted a great amount of air pollution. Those countries that received net embodied air pollution from China were in a trade deficit with China. These countries mainly referred to some developed ones, such as the UAE, Singapore, Bangladesh, Romania, Czech Republic, Slovakia. A

12

EEI (Kt.APE)

150 -150

350 -350

550 -550

Turkey Montenegro UAE Singapore Bangladesh Romania Czech Republic Slovakia Lebanon Jordan Hungary Egypt Croatia Nepal Syria Serbia Sri Lanka Afghanistan Albania Moldova Lithuania Maldives Turkmenistan Bosnia and Herzegovina Bhutan Armenia Azerbaijan Bulgaria Poland Georgia Tajikistan Latvia Slovenia TFYR Macedonia India Bahrain Estonia Uzbekistan Israel Ukraine Kuwait Brunei Iraq Belarus Pakistan Qatar Kyrgyzstan Iran Yemen Thailand Laos Malaysia Viet Nam Saudi Arabia Philippines Mongolia Oman Indonesia Cambodia Myanmar Russia Kazakhstan

EEX (Kt.APE)

650 EEX

BEET>0

EEI

13

BEET

450 450

250 250

50 50

Fig 3 a. Environmental surplus of the BR countries trade with China in 2015

Fig 3b. The trade surplus of the BR countries with China in 2015 BEET(Kt APE)

Journal Pre-proof

large number of goods made in China were exported to these countries.

BEET<0

650

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Russia,530.7

BT(Billion dollars)

40 Malaysia,99.4 30 Indonesia,154.9

Singapore,48.9

20 Kazakhstan,535.0

Montenegro,133.1 10

Oman,142.8

0 -700

-600

-500

-400

-300

-200

-100

0

100

200

300

BEET( Kt.APE)

Cambodia,195.4 Myanmar,350.1

-10

Saudi Arabia,100.8 -20

UAE,97.5

Turkey,158.6

Fig. 4. BEET and trade balance of the BR countries’ trade with China

From the perspective of sectors, as shown in Fig. 5, net embodied air pollution transfer mainly occurred to key sectors, such as Petroleum, Chemical and Non-Metallic Mineral Products, Metal Products, Agriculture, Mining and Quarrying, Electricity, Gas and Water. Among these sectors, Electricity, Gas and Water were in net embodied air pollution trade surplus with China. Although there was little direct product trade in Electricity, Gas and Water sector between China and the BR countries. BR countries imported a lot of goods from China. In 2015, China’s sectors including Textiles and Wearing Apparel, Metal Products, Electrical and Machinery, Transport Equipment, Other Manufacturing were in trade surplus with the BR countries. Massive power was consumed in these manufacturing sectors and resulted in considerable air pollution emission. 14

Journal Pre-proof Net embodied air pollution mainly flowed out the BR countries to China by Mining and Quarrying, and Agriculture sectors. Their net embodied air pollution flows amounted to 1.28 million tonnes APE and 0.94 million tonnes APE in 2015, respectively. They accounted for more than 70% of the total net embodied air pollution flows out of the BR countries. These reflected the fact that, as the most populous country and the second-largest economy in the world, China needs to import large quantities of agricultural products and minerals from the BR countries to meet domestic production and living needs. Most embodied air pollution flows at the sectoral level had the same as the trade flows, which is consistent with the previous study (Wang and Zhou, 2019). However, embodied air pollution flows in some sectors had the opposite direction as the trade flows. For example, the Metal Products sector had a trade deficit with China. This meant that the net goods flow in this sector were transferred from China to the BR countries. Meanwhile the negative BEET, according to its definition, implied net embodied air pollution flowed from BR countries to China. A possible explanation for this phenomenon lies in differences in production efficiency between China and the BR countries. Another explanation is different positions in the production chain between China and the BR countries. Generally, most of the BR countries are still at industrialization start stage and usually located at lower position of production chain than that of China. China might import primary product as an intermediate product with

15

Journal Pre-proof higher air pollution intensity and then exported products with a lower air pollution

BEET(Kt.APE)

intensity to the BR counties. 1000

Electricity, Gas and Water,0.07 633.46 ,

800 600 400 200 0

-40

-20

-200

0

20

60 BT(Billion dollars)

-400

Agriculture,10.16 , -938.14 ,

-600

Mining and Quarrying,34.76 , -1278.44 ,

-800

Metal Products,-7.90 , -425.40 ,

40

-1000 -1200 -1400 -1600

Fig.5. Sectoral net embodied air pollution transfer and trade balance

3.2 Environmental effects (1) Pressure transfer Fig. 6 represents the environmental pressure transfer between the BR countries and China. Here, environmental pressure is measured by the difference between PM2.5 air pollution (mean annual exposure) and China’s level. Therefore, environmental pressure transfer can be measured by the net volume of embodied air pollution with the unit of thousand tons APE.

16

Journal Pre-proof

Turkey, 158.6 ,

Montenegro, 133.1

UAE, 97.5

300

Bangladesh, 39.1 , Nepal, 9.0

200

Qatar,42.3 Egypt, 12.9 Environmental pressure (ug/m3 )

100 0 -80

-60

-40

-20

0

20

-100

Cambodia,195

-200

Indonesia, 154.9

40

60

Iraq, 28.5 Pakistan,37.3 Yemen, -63.8

-300 -400 -500

Myanmar, 350.1 -600

BEET (Kt.APE)

Kazakhstan,535

Saudi Arabia, 100.8

-700

Russia, 530.7

Fig. 6. Environmental pressure transfer between the BR countries and China

From Fig.6, the majority of the net embodied air pollution flowed to China was mainly from those countries with less environmental pressure (grey). Kazakhstan, Russia, Myanmar, Cambodia, and Indonesia led the top five contributors. Air pollutants flowed from countries with less environmental pressure to a higher one (China) means these suppliers bear no significant environmental pressure and can help improve the overall environmental performance. However, when the net embodied air pollutants are transferred from countries with higher PM2.5 exposure to lower ones, suppliers will face somewhat environmental transfer. For the BR countries, they transferred 154.8 Kt APE environmental pressure in trade with China in 2015. Saudi Arabia, Qatar, Pakistan are the main suppliers. For example, Saudi Arabia’s PM2.5 concentration is higher than that of China with 38.4 59 17

Journal Pre-proof ug/m3 and exported 100.8 Kt the net embodied air pollution to China in 2015. While China also transferred 616.3 Kt APE environmental pressure to the BR counties with lower PM2.5 exposure in 2015. Turkey, Montenegro, and UAE are the main receivers. They received 158.6, 133.1, and 97.5 Kt APE embodied air pollution in 2015, respectively. (2) Transfer efficiency We further investigate the efficiency of net embodied air pollution flow between China and the BR countries. The efficiency is defined as the output per embodied air pollutant, with a unit of thousand USD/ Kt.APE, which is the reciprocal function of the embodied air pollutant intensity. If net embodied air pollutants flow from counties/regions with higher efficiency to the lower ones, this flow can increase the overall efficiency of embodied air pollutants. Fig. 7 presents the efficiency of net embodied air pollutants flow between China and the BR countries. Due to most of the BR countries’ embodied air pollution efficiency lower than that of China, the main transfer flows to China decreased the overall embodied pollution efficiency and the net inefficiency embodied pollution flows amount to 3080.9 Kt.APE in 2015. The key suppliers include Kazakhstan, Russia, Myanmar, Cambodia, and Indonesia and among others. While another net inefficiency embodied pollution flows are exported to the BR countries with higher embodied air pollution efficiencies, such as UAE, Singapore, and Czech Republic(green) and are about 177 Kt.APE in 2015. 18

Journal Pre-proof

BEET(Kt.APE)

700.0

Kazakhstan:5.36,535.0

Rssia:19.5,530.7 China Output efficiency:25.0

600.0 500.0 400.0

Myanmar:6.2,350.1

Cambodia:1.5, 195.4

300.0 Indonesia:15.4 , 154.9 200.0 Qatar,26.0, 42.3

100.0

UAE:41.9,-97.5

Czech Republic,27.4 , -30.6 0.0 -10.0

0.0

10.0

20.0

30.0

40.0

50.0

-100.0 Singapore,27.8 , -48.9 -200.0

Bangladesh:16.6,-39.1

Montenegro:24.1,-133.1

Output Efficiency (Thousand USD/Kg)

Turkey:22.0,-158.6

-300.0

Lebanon：9.8,-21.7

Fig. 7. Comparisons of embodied air pollutants transfer volume and output efficiency between China and the BR countries in 2015

(3) Transfer and sustainability Another key concern of the BRI from the international community is its sustainability implication. Fig.8 presents the relationship of net embodied air pollutants transfer with their sustainability level. Here, the Human Development Index (HDI) represents the countries’ sustainable level. According to China’s Human Development Index, China is classified as a high human development country in 2015. From Fig. 7, the net embodied air pollutants to China are mainly transferred from countries with Medium Human development and above. The net embodied air pollutants are transferred from the BR countries with higher HDIs than China, which accounts for 56.4% of the total. However, extra attention should be paid to those suppliers who 19

Journal Pre-proof belonged to Low and Medium development countries. Air pollution could cause more

BEET(Kt.APE)

damage to local residents due to inadequate public medical facilities. 800 Low Human Development

Medium Human Development

High Human Development

600

Russia, 0.813,530.7

Kazakhstan,0.797 , 535.0

Myanmar,0.809 , 350.1

Cambodia, 0.571 , 195.4

400

Very high Human Development

Indonesia,0.686 , 154.9 Iran,0.483 , 63.8

200

0 0.30

Ⅱ

0.40

0.50

0.60

0.70

0.80

0.90

1.00

HDI -200

-400 China's Human Development index：0.743

Fig. 8. Embodied air pollutants transfer and sustainability between China and the BR countries in 2015

3.3 Driven forces analysis According to the above analysis, we find that the IEX and IIM of China witnessed a significant drop from 2010 to 2015. What drives China’s trade with the BR countries in a greener way? In this part, we applied the LMDI-I method to decompose the IIM and IEX into trade structure effect, technology effect and pollution structure effect to check their driving forces. The results are shown in Table 1. Table 1. LMDI decomposition of the changes in China’s IEX and IIM during 2010-2015 20

Journal Pre-proof IEX Periods

IIM

D tot

DS

DT

DP

D tot

DS

DT

DP

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

2010-2011

0.815

1.007

0.810

1.000

0.831

1.006

0.826

1.000

2011-2012

0.960

0.997

0.963

1.000

0.972

1.002

0.970

1.000

2012-2013

0.900

1.004

0.896

1.000

0.968

1.000

0.967

1.000

2013-2014

0.939

1.013

0.928

1.000

0.965

1.000

0.965

1.000

2014-2015

0.994

1.005

0.989

1.000

1.064

1.005

1.059

1.000

2010-2015

0.657

1.026

0.641

1.000

0.803

1.014

0.792

1.000

Table 1 shows the decomposition results of China’s IEX and IIM, respectively. Generally speaking, the IEX has witnessed a drop of 34.3 % from 2010 to 2015. In the subsequent periods 2001-2012, 2012-2013 and 2013-2014, and 2014-2015, the IEX decreased by 4.0%, 10.0%, 6.1% and 0.6%, respectively. Regarding the change in the IIM, it decreased by 19.1 percent from 2010 to 2015. In the subsequent periods 2001-2012, 2012-2013 and 2013-2014, the IIM deceased by16.9%, 2.8%, 3.2%, and3.5%, respectively. However, during 2014-2015, the IIM increased by 5.9% which means the import of China from the BR countries in 2015 became dirtier compared to that in 2014. With regard to the driving forces, LMDI-I analysis of the decrease in the IEX and in the IIM is similar. The biggest contribution lies in its technological effect. It decreased by 33.9% in the IEX and 21.8% in the IIM, respectively. The trade structure 21

Journal Pre-proof effect has a negative effect on their decreases. It increased by 2.6% in IEX and 1.4% in the IIM, respectively. However, the values of the pollutant structure effect are almost close to the one and indicated it has no contribution to the change in IEX and IIM. Differences in the contribution of trade structure and technological progress to the decrease in China IEX could be explained by follows. According to the previous studies, domestic industrial structure and technological progress are the main factors affecting trade structure(Liu and Zhang, 2016; Wang and Song, 2019; Zhang, 2011; Zhao and Zhou, 2009). Technological innovation in China’s energy and environment fields gained extra momentum from 2010 to 2015, which were triggered by its national ambitious energy-saving and emission reduction plan and toughest plan to combat air pollution. However, China's industrial structure updating was blocked by its bold fiscal stimulus programs embarked in late 2008 and 2009. The stimulus efforts aimed to create supply rather than making up for the lack of demand in the economy, which exerted adverse effects on China’s domestic industrial structure and its trade structure. It was testified by(Liu and Zhang, 2016) Liu and Zhang (2016) whose study showed that the shares of resource-intensive goods and low-tech products in China trade volume experienced an increase from 2010 to 201, which were abnormal to China trade structure changes in past decades. An interesting result is that the pollutant structure effect has almost no contribution to the decrease in China’s IEX. As we know, air pollutants mainly come from fuel 22

Journal Pre-proof combustion and industrial process. The result seems to conflict with China's great efforts to cut air pollution. From 2015 to 2010, emissions of major pollutants in the exhaust gas, such as SO2 and NOx, were reduced by 18% and 18.6%, respectively (MEP, 2015). However, the same proportion of reduction in major pollutants indicated that China’s air pollution structure had no significant changes from 2010 to 2015. From the sectoral perspective (see table 2), Electricity, gas and water, and Transport, Petroleum, chemical and non-metallic mineral products, severed as the main contributors to the decreases in China’s IEX. Their IEX reduced by 13.1%, 6.3%, and 5.5% over our period of analysis, respectively. The results reflected the achievements of energy and emission efficiency improvement in the above sectors. Coal-fired power supply coal consumption per kWh was reduced from 333 grams of Coal equivalent in 2010 to 318 grams of Coal equivalent in 2015(State Council, 2013, 2016). On the other hand, desulfurization facilities covered more than 99% of coal-fired power plants by the end of 2015. The coal-fired power with denitrification facilities increased from 0.8 billion kilowatts to 830 million kilowatts, and the installation rate increased from 12% in 2010 to 92% in 2015 (MEP, 2015). Regarding the decreases in China’s IIM, Wood and paper, other manufacturing, and construction sectors served as the most contributors and decreased by 2.1%,1.5%, and 1.3% over our period of analysis, respectively. A possible explanation was that the increased international demand and a large amount of foreign investment might

23

Journal Pre-proof improve their technological level and output efficiency, especially in Wood and paper and Construction sectors Table 2. LMDI decomposition of China’s sectoral embodied pollutants intensity changes during 2010-2015

IEX

IIM

D tot

DS

DT

DP

D tot

DS

DT

DP

(1)

(2)

(3)

(4)

(1)

(2)

(3)

(4)

Agriculture

0.991

0.999

0.992

1.000

0.971

1.005

0.966

1.000

Fishing

1.000

1.000

1.000

1.000

0.999

1.000

0.999

1.000

0.966

1.008

0.959

1.000

0.950

0.999

0.952

1.000

Food & Beverages

0.996

1.000

0.996

1.000

0.996

1.001

0.995

1.000

Textiles and wearing Apparel

0.989

1.001

0.989

1.000

0.997

0.999

0.998

1.000

Wood and paper

0.997

1.000

0.997

1.000

0.997

1.000

0.997

1.001

Petroleum, chemical and non-

0.945

1.003

0.942

1.000

0.973

0.999

0.974

1.000

Metal products

0.965

1.001

0.964

1.000

0.973

1.006

0.967

1.000

Electrical and machinery

0.969

0.998

0.971

1.000

0.990

0.999

0.991

1.000

Transport equipment

0.993

1.000

0.993

1.000

0.998

1.000

0.998

1.000

Other manufacturing

0.997

1.000

0.997

1.000

0.999

1.000

0.999

1.000

1.000

1.000

1.000

1.000

0.998

1.000

0.998

1.000

0.869

1.013

0.858

1.000

0.976

0.999

0.977

1.000

Mining and quarrying

metallic mineral products

Recycling Electricity, gas and water

24

Journal Pre-proof Construction

0.999

1.000

0.999

1.000

0.999

1.000

0.999

1.000

Maintenance and repair

1.000

1.000

1.000

1.000

0.999

1.000

1.000

1.000

Wholesale trade

0.999

1.000

0.999

1.000

0.999

1.000

0.999

1.000

Retail trade

0.998

1.000

0.998

1.000

0.999

1.000

0.999

1.000

Hotels and restaurants

0.998

1.000

0.998

1.000

0.999

1.000

0.999

1.000

Transport

0.937

1.003

0.934

1.000

0.978

0.999

0.979

1.000

Post and telecommunications

0.999

1.000

0.999

1.000

0.999

1.000

0.999

1.000

0.992

1.000

0.992

1.000

0.996

1.000

0.996

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

0.996

1.000

0.996

1.000

0.998

1.001

0.998

1.000

Private households

1.000

1.000

1.000

1.000

0.999

1.000

0.999

1.000

Others

1.000

1.000

1.000

1.000

0.999

1.000

0.999

1.000

Total

0.657

1.026

0.641

1.000

0.803

1.009

0.796

1.000

Financial intermediation and business activities Public administration Education, health and Other services

4. Conclusion and policy implication 4.1Conclusion In this paper, we investigated the embodied air pollution displacement of ChinaBR trade. The results showed that the air pollution displacement was aggravated in the period of analysis, which would add worries that China would phase out its polluting industries to the BR countries to achieve its domestic green shift. In this case, environmental damage and pollution was simply transferred rather than genuinely

25

Journal Pre-proof reduced(Tracy et al., 2017), which was not conducive to the BR regions’ sustainable development. Another finding of our work was that China ran the surplus of embodied air pollution trade with the BR countries. Due to most of the BR countries are at the crucial stage of industrialization and urbanization, our findings align with the previous studies which found embodied flows were mainly transferred from the less developed countries/regions to developed ones. (Han et al., 2018; Zhang, W. et al., 2018; Zhao et al., 2015). The difference between our findings with the previous papers lied in China’s embodied air pollution trade surplus mainly came from its fossil energy importers in the regions. For the sectors, Agriculture, Mining and Quarrying sectors served the main suppliers to China. Regarding its environmental effects, although air pollution load displacement of China-BR trade was aggravated, most embodied air pollutants mainly came from countries with better air quality and higher HDI than that of China. This would somewhat ease the worry that China’s trade with the BR countries would lead to environmental deterioration. However, from the perspective of output efficiency, the inefficiency flows of embodies air pollution form the BR countries to China lowered the overall efficiency. Decomposition analysis showed that the driving forces for the reduction of China’s IEX and IIM were similar. The technological effect served as the most critical driving force for their reduction. For example, the technological effect of China’s IEX 26

Journal Pre-proof decreased by 33.9%, while it reduced by 21.8% in China’s IIM. This finding was similar to that of existing literature (Rui. and Ri-jia., 2018; Xie. and Zhao., 2016). However, the trade structure effect increased the embodied air pollution intensity of China-BR countries. Pollutant structure effect had also no contribution to the reduction in China’s IEX and IIM over the period of analysis. The results and conclusions of embodied air pollution flow in China-BR trade and structural decomposition analysis are helpful for us to derive the following policy implications. To ease the growing concerns resulting from the aggravated air pollution load displacement of China-BR trade, China has to put its ecological civilization theories into the practice of building a green BRI. For example, the Chinese government should encourage Chinese companies to adopt more green technologies to update their excess capacity when they move them to the BR countries. Furthermore, Asian Infrastructure Investment Bank and the New Development Bank, mainly funded by the Chinese government, should pay much attention to green finance mechanisms to enhance the BR countries’ sustainable ability. On the other hand, to counter the adverse effects of trade structure, great efforts are needed for China to further update its industrial structure and embrace a knowledge-based and service-oriented economy. These sectors are located in the downstream of the industrial chain and can bring a large amount of economic output(Wang and Zhou, 2019a). For the BR countries, although some countries had a relatively better 27

Journal Pre-proof environmental performance in terms of PM2.5 exposure than that of China, most of these countries still are at the early stage of industrialization and urbanization with a fragile ecological environment. Therefore, these countries should enhance their environmental standards. This would help them avoid the adverse effects of traditional industrialization and urbanization. For natural resources exporting countries, they should vigorously develop their manufacturing industries with more advanced technology, which could help them transform from natural resources exporters to resource product exporters. Besides, China’s successful experience in combating air pollution and the technology of green power generation will help the BR countries better deal with such issues. For the world, all nations should promote technical cooperation to promote green development, especially between developed and less developed countries. This requires that all nations should facilitate the transfer of green and applicable technologies to developing countries along the BR route. Besides, all nations should intensify their cooperation on formulating environmental agreements to control embodied air pollution in trade activities. In this paper, we conducted an empirical study on air pollution load displacement of China-BR trade. Our decomposition analysis showed that pollutant structure seems to have no contribution to the decreases in China’s embodied air pollution intensity. How to play the role of pollutant structure effects to further decrease the embodied air pollution intensity, we need further researches. 28

Journal Pre-proof Acknowledgements This paper is funded by the National Natural Science Foundation of China (No. 71303126), Natural Science Foundation of Shandong Province (No. ZR2013GQ008), and Philosophy and Social Science Planning Research Project of Qingdao (No.QDKSL170113). Declaration of interests All authors have no competing financial interests.

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Journal Pre-proof All authors have no competing financial interests.

Journal Pre-proof Highlights 1. Embodied air pollution transfer in China-BR trade are investigated 2. Embodied air pollution displacement of in China-BR was aggravated 3. China was in embodied air pollution trade surplus with the BR countries 4. Technological effect mainly drives China’s trade with the BR countries greener