Renewable Energy for Balancing Carbon Emissions and Reducing Carbon Transfer under Global Value Chains: A Way Forward

Abstract

Research on the relationship between a country’s renewable energy consumption and carbon emissions is of great significance for reducing carbon emissions embodied in international trade. There always exists a gap between production-based and consumption-based carbon emissions. Accordingly, this paper investigates the influence of renewable energy consumption on carbon emission balance, the ratio of production-based emissions to consumption-based emissions, in various countries using the ordinary least square (OLS) method and generalized method of moments (GMM) method. We found that a 1% increase in renewable energy consumption can decrease the carbon emission balance by 5.8%. Furthermore, renewable energy consumption can help narrow the gap between production-based and consumption-based carbon emissions in net emission exporters. In addition, renewable energy consumption can also weaken the negative impact of the global value chains (GVCs) division system on the carbon emission balance. The findings in this study fill the research gap by analyzing the heterogeneous impacts of renewable energy consumption on carbon emission balance embodied within a GVC division system in various countries and provide policy suggestions that renewable energy consumption should be encouraged in net emission exporters to reduce the carbon emission transfers.