Industry Transfer, Environmental Regulation And CO₂Emissions

Since the1980s when Water and Ugelow put forward the famous “PollutionHaven hypothesis”, the geographical phenomenon of pollution industry transfer hasalways been the focus of academic sector and government policy-making bodies.Based on the core of comparative advantages, traditional mainstream economics havesucceed in involving environmental factors into the analysis framework of generalequilibrium to explain the potential difference of environmental regulation amongregions, pollution industries’ transfer, and enterprises’ environmental-sourcingbehavior mechanism. However, most existing theories and empirical studies onpollution industries’ transfer pay attention to explaining the developed countries’trade benefits and investment gains, but fail to provide a sufficient knowledge ofChina’s background–the vertically specialized labor division and overlook “implicit”transfer mechanism of pollution industries which take the input of intermediateproducts as their carrier. In the meantime, given that the serious global warming hasreceived approval of people from all walks of life, a new subject of regional carbonemission transfer has been raised in the field of research on traditional pollutionindustries’ transfer, but there are few studies on issues related to systematic analysisof pollution industries’ transfer under low-carbon background. More and moreempirical intuition tells people: in the case of multiple rounds of climate negotiation,China should strive for active status to fairly and reasonably take the responsibility ofinternational climate, i.e. in addition to focusing on total carbon emission, per capitacarbon emission, and historical carbon emission, it must pay attention to the implicitcarbon emission transfer. The strong realistic demand promotes academic sector tooffer new theoretical support and empirical experience. Thus, based on theoreticalanalysis, statistical accounting and empirical research, this paper aims at exploringthe “implicit” transfer mechanism of pollution channeled through intermediateproduct trade. This research will not only broaden the occurrence mechanism oftraditional pollution industries’ transfer, but also provide theoretical foundation andempirical basis for decision-making bodies to specify international and interregionalclimate and ecological responsibilities, distribute reasonable carbon emissionreduction target, and guide ordered industrial transfer. This paper systematically summarizes and comparatively analyzes the theory ofclassic pollution industries’ transfer, which is different from the entire-relocation“explicit” pollution transfer of polluting enterprises in traditional theory. By takingthe background of international vertical labor division as a new breakthrough, thepaper brings the role of implicit carrier of intermediate product flow in pollutionindustries transfer into the analysis framework of melitz (2003) manufacturerinvestment and trade theory, to analyze the comparative advantages of environmentalregulation to enterprises’ production costs, illustrate the micro occurrence mechanismof “implicit” pollution industries’ transfer, probe into the heterogeneous enterprises’environmental-sourcing behavior, and provide a more objective and comprehensivetheoretical elaboration for the phenomenon of “pollution haven”. The theoreticalderivation proves such a result, i.e. under the background of constantly evolvingglobal vertical labor division, the comparative advantages caused by the difference inenvironmental control costs among regions enables pollution-intensive production totransfer from regions with high environmental protection standard to regions with lowenvironmental protection standard and helps to replace domestic dirty productionprocesses by importing pollution-intensive intermediate products, so as to produce“implicit” pollution haven effect, and in particular, enterprises with large capitaldensity would be more likely to produce “implicit” pollution transfer.According to the implicit carrier role of intermediate product flow in pollutionindustries’ transfer in theoretical analysis, the paper redefines the concept ofindustrial transfer from the perspective of the input of intermediate products andcarries out visibility processing for the overall pattern of China’s international andinterregional carbon emission transfer by relying on the calculation of input-outputtable among regions. Results of research on international industrial transfer indicatethat the industrial carrier of carbon emission transfer between China and members ofthe OECD is diversified and industries undertaken by China include both pollutingindustries with high coefficient on carbon emission and clean industries. On the whole,the international industrial transfer causes large amounts of carbon emissions to Chinaby means of industrial flight and China obtains strong income effect frominternational carbon emission transfer, to form into an adverse situation of“consuming at home and polluting abroad”. For another, results of analyzing China’sinterregional carbon emission transfer indicate that obvious regional imbalance existsin carbon emission among eight major regions and a trend of “moving northward” and“heading westward” is presented to regional carbon emission transfer. In China, the northeast regions, northern coastal regions, and central and western regions havebecome the “haven” to weed out industries with energy-extensive consumption andhigh emission in regional industrial transfer, while economically developedBeijing-Tianjin regions, eastern coastal regions, and southern coastal regions areplaces to transfer industries with energy-extensive consumption and high emissionout.In consideration of the large-scale international and interregional carbonemission transfer, this paper tries to test the pollution transfer mechanism mentionedin theoretical analysis, i.e. it carries out an empirical test of the “implicit” pollutionhaven caused by environmental regulation. Due to the difference in availability ofsample data between international standard and interregional standard, in terms ofinternational standard, the paper selects continuous dependent variables andsimultaneous equation model to make an empirical analysis of “implicit” pollutionhaven effect under the path of FDI; in terms of China’s interregional standard, thepaper selects discrete dependent variables and single equation model for newenterprises’ site selection to investigate the “implicit” pollution haven effect based onthe difference in regional environmental regulation. In empirical analysis, both“exported intermediate product carbon emission” and “capital density” have beenadopted for classified processing of samples. Researches show that foreign directinvestment fails to reflect entire-relocation “explicit” pollution haven effect, and thetest results of exported intermediate product groups with high emission help people toobtain the empirical evidence of “implicit” pollution haven effect, to indicate that the“implicit” pollution haven taking intermediate product as carrier exists based on thepath of international industrial transfer. Through grouping industries by taking capitaldensity as index, the research results confirm that industries with larger capitaldensity have stronger environmental-sourcing motivation and they are more likely toproduce “implicit” pollution haven effect. For another, the analysis results of Poissonpanel data regression model in interregional industrial transfer show that “implicit”and “explicit” carbon pollution haven effect co-exist, and the research results alsoprove that industries with larger capital density are more likely to produce “implicit”pollution haven effect. Therefore, industrial transfer by both international andinterregional standard confirms two major conclusions in theoretical analysis.Through further comparing the sensitivity of foreign-funded and domestic-fundednew enterprises’ site selection, the research finds that strengthening environmentalregulation is more likely to cause the entire transfer of some domestic-funded enterprises that are sensitive to environmental costs, so as to play a role of “firewall”;while foreign-funded enterprises are more adept at transferring carbon emission out inan implicit way by giving play to the substitution function of pollution-intensiveintermediate products.In light of the basic pattern of carbon emission transfer and practical condition ofpollution haven effect in China, this paper makes use of directional distance functionto have a situational analysis of cost difference in carbon emission in each region ofChina based on the environmental regulation difference. Besides, on the basis of theconclusion reached by situational analysis, the paper proposes setting differencegradient of carbon regulation difference suitable for regional coordination andlow-carbon development. Research results indicate that strict environmentalregulation policy should be adopted in eastern coastal regions, Beijing-Tianjin regions,northern coastal regions and northern regions of China; while general environmentalregulation policy should be adopted in central and western regions of China. Based onthe environmental regulation difference, it is the most reasonable and efficient totransfer carbon emission from eastern coastal regions, Beijing-Tianjin regions,northern coastal regions and northern regions to central and western regions, andgovernment decision-making bodies can make use of appropriate environmentaldifference setting to guide ordered industrial transfer and regional low-carbondevelopment.At last, based on theoretical analysis, statistical accounting and empiricalresearch, the paper makes some policy proposals for reasonably guiding regionallow-carbon development, achieving ordered industrial transfer, and striving forinitiative of international climate negotiation. These proposals are as follows: bytaking accurately calculating the volume of transferred carbon emissions asbreakthrough, the government should positively strive for an active status ofinternational climate negotiation, construct fair responsibility sharing target system ofcarbon emission reduction, and actively compete for international fund compensationand energy conservation technology assistance; it should carry out classifiedsupervision of critical industries with an aim of energy conservation and emissionreduction and pay close attention to “implicit” pollution transfer based on carbonemission of intermediate products; it should raise the standard and focus onsupervising traditional pollution-intensive industries with high coefficient of carbonemission; it should enhance classified supervision of domestic and foreign capitals; itshould improve environment and production technology through multiple channels to promote upgrading of industrial structure, including encouraging local enterprises toimplement import substitution with pollution-intensive intermediate products,enhancing environment and production technology with technology spillover of cleanindustries, inspiring them to develop clean industries, and intensifying their capabilityof independent innovation; it should set appropriate regional environmental regulationdifference and lead ordered industrial transfer; besides, it should construct standardaccounting system of regional carbon transfer, reasonably distribute regional emissionreduction targets and establish compensation mechanism of regional carbon transfer.