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Policy Analysis

Unequal exchange of air pollution and economic benefits embodied in China’s exports Wei Zhang, Feng Wang, Klaus Hubacek, Yu Liu, Jinnan Wang, Kuishuang Feng, Ling Jiang, Hongqiang Jiang, Bing Zhang, and Jun Bi Environ. Sci. Technol., Just Accepted Manuscript • DOI: 10.1021/acs.est.7b05651 • Publication Date (Web): 02 Mar 2018 Downloaded from http://pubs.acs.org on March 4, 2018

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Environmental Science & Technology

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Unequal exchange of air pollution and economic benefits embodied in China’s exports

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Wei Zhanga,b,‡, Feng Wanga,‡, Klaus Hubacekc,d, Yu Liue,f, Jinnan Wangb,*, Kuishuang Fengc, Ling Jiangg,

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Hongqiang Jiangb, Bing Zhanga and Jun Bia,*

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a. State Key Laboratory of Pollution Control and Resource Reuse, School of the Environment, Nanjing University, Nanjing, Jiangsu

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China.

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b. State Environmental Protection Key Laboratory of Environmental Planning and Policy Simulation, Chinese Academy for

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Environmental Planning, Beijing, China.

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c. Department of Geographical Sciences, University of Maryland, College Park, MD.

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d. Department of Environmental Studies, Masaryk University, Brno, Czech Republic.

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e. Institute of Science and Development, Chinese Academy of Sciences, Beijing, China.

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f. School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China

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g. School of Government, Central University of Finance and Economics, Beijing, China.

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Abstract: As the world’s factory, China has enjoyed huge economic benefits from international export but also suffered

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severe environmental consequences. Most studies investigating unequal environmental exchange associated with trade

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took China as a homogenous entity ignoring considerable inequality and outsourcing of pollution within China. This

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paper traces the regional mismatch of export-induced economic benefits and environmental costs along national supply

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chains by using the latest multi-regional input-output model and emission inventory for 2012. The results indicated that

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approximately 56% of the national GDP induced by exports has been received by developed coastal regions, while about

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72% of air pollution embodied in national exports, measured as aggregated atmospheric pollutant equivalents (APE), has

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been mainly incurred by less developed central and western regions. For each yuan of export-induced GDP, developed

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regions only incurred 0.4~0.6 g APE emissions, while less developed regions from western or central China had to suffer

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4 to 8 times the amount of emissions. This is due to poorer regions providing lower value added and higher emission-

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intensive inputs and having lower environmental standards and less efficient technologies. Our results may pave a way to

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mitigate the unequal relationship between developed and less developed regions from the perspective of environment-

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economy nexus.

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ACS Paragon Plus Environment


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Table of Contents (TOC)

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1. Introduction

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Since the accession to the World Trade Organization (WTO) in 2001, China has gradually become a factory for the

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world. During 2001-2015, exports in China have increased by an average of 16.1% per annum 1. In 2016, China, the

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largest exporter globally, contributed about 13.2% of world merchandise export 2. The astounding growth of exports has

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also significantly fostered China’s economic prosperity. In spite of the unprecedented economic gains, the “China Dragon”

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has suffered severe air pollution and become a “Pollution Dragon” 3, with exports being an important driving factor of

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the serious air pollution in China 4-6. For example, 15%, 21%, 23% and 21% of Chinese industrial primary fine particular

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matters (PM2.5), sulfur dioxide (SO2), nitrogen oxides (NOx) and non-methane volatile organic compounds (NMVOC)

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emissions, respectively, were caused by China’s exports in 2007 7. Moreover, PM2.5 emissions embodied in China’s

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exports accounted for about 27%, 29% and 26% of consumption-based emissions in the USA, Japan and Western Europe

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in 2007, respectively 8. Export-induced emission transfers have also given rise to aerosol climate forcing 9, and other

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serious environmental pollution such as PM2.5 10, sulfate, ozone, black carbon, carbon monoxide 11, and associated health

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problems 12. Specifically, export was estimated to cause 12% of China’ total mortality attributable to PM2.5-related air

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pollution in 2007 10.

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Moreover, export may further aggravate the imbalance in regional emission transfers within China. Due to substantial

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regional disparities in economic structure, resource endowment and technological capabilities in China, developed coastal

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regions are more specialized in the production of high value-added commodities, while the less developed central and

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western regions have a larger share of low value-added but high pollution-intensive heavy industry and manufacturing

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(steel, cement, thermal power, etc.) 10. To satisfy regional consumption in coastal China, the less developed central and

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western regions have incurred emissions of atmospheric pollutants through their contribution to national and global supply

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chains 13-18. In addition, production for international export from coastal regions has also created emissions pressures in

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less developed regions—about 50% of air pollutant emissions embodied in coastal regions’ exports were outsourced to

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Central, Northwest and Southwest through consuming intermediate products from those regions7. Within Beijing–

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Tianjin–Hebei, China’s most polluted area, Hebei incurred about 8~30% of the emissions through its contribution to

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Beijing’s exports in 2010 19. Overall, less developed regions suffer a larger share of air pollution-related mortality and

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environmental damage caused by export production 20. 2


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Exports among regions or countries not only allows for exchange of goods and services but also causes hidden pollution

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transfers 19, 21-23. At the global level, developed countries have been able to grab much larger shares of value added, while

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developing countries incurred a larger share of pollution and negative health affects along global supply chains

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Nevertheless, due to pollution intensive energy mix, less efficient production technologies as well as an inferior position

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in the global value chain, China contributes larger shares of energy- and emission-intensive final and intermediate

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products to global supply chains 27. Therefore, China has suffered higher shares of ecological and environmental loss, in

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comparison to the global shares of value added along global supply chains

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regional economic development within China, previous studies have mainly focused on China’s inter-provincial virtual

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flows of emission 7, 10 and related mortality10 caused by international trade. Although the imbalanced distributions of

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regional mortality and economic gains has been involved in previous research 10, the inherent pathway, how the

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environmental and economic inequality generated along the intricate domestic supply chains at provincial and sectoral

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level, still need further analysis. Such in-depth quantification of the export-induced mismatch between economic gains

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and environmental loss may uncover the potential obstacle of greener domestic supply chains and facilitate cross-

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boundary air pollution control between coastal and inland regions.

21, 24-26

.

21, 24, 25, 28-30

. With respect to the unbalanced

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To fill this gap, here we developed a multiregional input-output (MRIO) model with air pollutant emission inventory

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(i.e., SO2, NOx, particulate matter (PM)) to quantify the economic benefits and environmental costs induced from

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international trade based on the most recently available data (see Figure S3 in Supporting Information(SI)). The MRIO

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table in 2012 includes 30 provinces (excluding Tibet, Hong Kong, Macau and Taiwan due to the lack of data) and 30

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economic sectors for each province (Table S2 in SI). The bottom-up air pollutant emission inventory has been further

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aggregated to atmospheric pollutant equivalents (APE) to comprehensively represent the severity of air pollution (details

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see Materials and Methods). Moreover, an economic and environmental justice index (i.e., AG index, see Materials and

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Methods) has been built to characterize regional environmental justice related to international export.

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2. Materials and Methods 2.1 Multi-regional input-output analysis

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The multiregional input-output approach is able to characterize economic flows between regions, economic sectors and

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final demand 27. Through a combination of regional and sectoral emission inventories, MRIO can effectively uncover the

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pollutant emissions in other regions caused by the consumption of a given region 31. These features make MRIO a popular

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method to quantify trade activities and their national or regional environmental impacts such as carbon dioxide 32, water

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shortage 33, 34, atmospheric air pollution 7, 14 and public health 6, 10, 17.

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Each row’s balance of the monetary MRIO table (Table S1 in SI) can be written as: xir   aijrs x sj   yirs  yire s

86 87

j

(1)

s

r Here, there are n sectors and m regions. r and s represent some region in m, i and j represent some sector in n. xi rs represents the total output of sector i in region r; aij is direct consumption coefficient, representing the requirement

3



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from sector i in region r to produce per unit output for sector j in region s. aijrs x sj is the products of sector i in region r as

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rs intermediate input consumed by sector j in region s; yi refers to the products of sector i from region r consumed finally

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re in region s; yi represents the final products of sector i in region r for international exports. Note that part of the

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exported final products may return to China to be finally processed in other final or intermediate goods from the

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perspective of global supply chain. However, such feedback effect has not been considered in this paper.

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rs re d r e Then, we use x , y , y to represent vectors of xi , yi and yi , and let A be the matrix of aijrs , respectively.

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In this paper, matrices are indicated by bold, italicized capital letters; vectors are denoted by bold, italicized lower case

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letters. In addition, scalars are presented by italicized lower case letters. Equation (1) can be expressed as:

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x  ( I  A) 1  ( y d  y e )

(3)

d In this paper, we remove y from equation (3) to focus on the air pollutant emissions and economic benefits caused

by international exports only, as follows:

x e  ( I  A) 1  y e

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(2)

Equation (2) can be further expressed as:

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x  Ax  y d  y e

(4)

Here, x e represents the total output vector caused by the international export of all regions; I is identity matrix and

( I  A) 1 is the Leontief inverse matrix.

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Let f   fi r mn1 and d   dir mn1 refers to sectoral air pollution emissions intensity (SO2, NOx and PM) and value

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r r r r r r added coefficient for each region, respectively. The respective elements f i  ei xi and di  vi xi represent the air

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r r pollutant emissions and value added per unit of total output, where ei and vi represent air pollutant emissions and

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value added of sector i in region r. Then, Equation (4) can be expressed as the following equations:

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E  fˆ  ( I  A)1  y e

(5)

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V  dˆ  ( I  A)1  y e

(6)

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Here, the notation ^ indicates the diagonalization of corresponding column vectors.

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Therefore, the air pollutant emissions E rs and value added V rs in region r driving by international export other

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region, such as region s, can be calculated as:

E rs  fˆ r  ( I  A)1  yˆ se

4


(7)

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V rs  dˆ r  ( I  A)1  yˆ se

(8)

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Here, if s  r , E rs and V rs indicate the production of final exported products or intermediate products in region r

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is to fulfill region r’s local international export, and the accompany emissions and value added is termed as region r’s

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direct emissions or value added in this paper; if s  r , E rs and V rs mean the emission or value added occurred in

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region r is finally embodied in region s’s international export via cross-regional supply chains. The summation of the

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values of all region s (except region r) can be termed as region r’s indirect emissions or value added in this paper (see

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se Figure S3). Here yˆ is a diagonal matrix with the corresponding international exports for region s, but zeroes for all

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other regions.

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The air pollutant emissions e r and value added v r that occurred in region r and triggered by all regions’ international

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exports, are defined as region r’s territorial emissions and value added in this paper, which can be expressed as follows:

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e r   e rs

m

(9)

s 1

m

v r   v rs

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(10)

s 1

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where, e rs and v rs are the corresponding elements in matrices E rs and V rs , respectively.

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Furthermore, the emissions et s and value added vt s that occurred in all regions but triggered by the international

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exports of region s, are defined as region s’s trade-related emissions and value added in this paper, respectively, as shown

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in following equation, m

et s   e rs

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(11)

r 1 m

vt s   v rs

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(12)

r 1

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To represent the disproportion of transferred air emissions and value added, a regional economic and environmental justice index, i.e., APE-GDP index (hereafter AG index for abbreviation), has been built, shown as follow: ag rs 

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e rs v rs

(13)

Here, ag rs , the AG index (unit: g/yuan), refers to export-related air pollutant emissions that occurred in region r in

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exchange for export-related monetary flows from region s.

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2.2 Data sources

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Chinese MRIO table and sectoral air pollutant emission inventories were used in this study. The MRIO table was

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compiled based on China’s original provincial monetary input-output tables for 2012, which were released in 2016 by the

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National Bureau of Statistics 35. Additionally, a hybrid technique based on maximum entropy and dual-constrained gravity 5



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models 36, 37 was employed to trace inter-sectoral trade flows between each province in the process of MRIO compilation.

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The MRIO table includes 30 provinces (excluding Tibet, Hong Kong, Macau and Taiwan due to the lack of data) and 30

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economic sectors for each province (Table S2 in SI). Furthermore, because the goods in the original provincial monetary

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input-output table consider domestic goods and imports together 38, we separated imported goods from domestic goods

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for both intermediate and final use. Details about the compilation of Chinese 2012 MRIO tables are presented in the SI.

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The bottom-up emission inventory contains three main types of air pollutants, SO2, NOx and PM, from industry, traffic,

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agriculture and service sector sources. Here, PM in China’s environmental statistics comprises soot and dust, which both

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contains total suspended particulates (TSP), PM10 and PM2.5. Emissions from industry and traffic were derived from the

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China Environmental Statistics (CES) database

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vehicles in all 30 provinces in 2012. The CES database is regarded as the most authoritative survey data source for

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pollution in China. It is worth noting that there may exist uncertainties in our emission inventory. For example, a certain

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proportion of air pollutant emissions from electricity and heat power sector may occur for residential district heating,

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especially in North China 40. However, we could not separate this part because the values of above two sectors were

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aggregated in original provincial input-output tables 41. Detailed information on the data sources and uncertainty are listed

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in the SI.

39

, which contains 147,996 industrial sources and different types of

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China’s Ministry of Environmental Protection (MEP) established a system of imposing a discharge fee on various

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aquatic, atmospheric and solid pollutants in 1982. To simplify the discharge fee of various pollutants, MEP designed a

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new measure called “pollutant equivalent”, which allows aggregating different types of pollutants according to their

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environmental and health impacts by assigning a specific coefficient representing their respective damage to each

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pollutant. The conversion coefficient can be calculated according to MEP’s scientific method, which comprehensively

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considers each pollutant’s impact on ecological system, toxicity on organism and technical feasibility to remove 42. Above

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methodology gives us a chance to comprehensively represent the severity of air pollution by using three major air

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pollutants. In this study, SO2, NOx, soot and dust are combined into a new measure named atmospheric pollutant

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equivalents (APE). Based on China’s official documents concerning pollution charge schedule, the respective conversion

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coefficient to APE for SO2, NOx, soot and dust is 0.95, 0.95, 2.18 and 4, which means that 1 kg APE is equal to 0.95, 0.95,

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2.18 and 4 kg of SO2, NOx, soot and dust, respectively (details are listed in SI) 43.

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The sectoral value-added amounts for 30 provinces were directly derived from the MRIO table, consisting of employee

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compensation, net taxes on production, depreciation of fixed assets and operating surplus. In this paper, the effects of sub-

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items will not be distinguished, and we only use total value added to calculate vector D, as shown in equation (6). By

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definition GDP is equal to value added.

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3. Results and discussion 3.1 Export structure of each province in China

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Figure 1 shows China’s exports per province and sector. In 2012, total exports amounted to 13,688 billion yuan (i.e.

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2,168 billion US$), contributing about 11% of global exports. Significant discrepancies existed in international export for

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China’s 30 provinces due to differential regional development and economic structure. Export are heavily skewed toward 6


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richer regions. In 2012, the total value of export in the top ten provinces, ranked by per capita GDP, accounted for 81.5%

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of the national total, and exports in Beijing-Tianjin, the top two municipalities in terms of per capita GDP, accounted for

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5.3% (Figure 1a & Figure 1c). The total value of export in Guangdong, the largest exporter in 2012, amounted to 3,327

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billion yuan (24.3% of national), which nearly amounted to 1.5 times of the sum of the total exports in Central, Northwest

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and Southwest. At the sector level, Electronic equipment and Electrical equipment accounted for 30% of national exports

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(Figure 1b). Guangdong occupied the largest share in Electronic and Electrical Equipment exports, accounting for about

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41% of national sectoral export. For other regions, Electronic products and Services contributed about 43% of Beijing-

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Tianjin’s exports, while Chemical industry (14.3%) ranked first in the exports of North. As the old industrial base,

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Transport equipment (11.8%) and General equipment (8.8%) dominated the Northeast’s exports.

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Figure 1. Export structures of China and each province in 2012. (a) and (b) show sectoral shares of provincial and national total

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exports, respectively; (c) depicts each province’s GDP per capita in 2012. The full names of abbreviation for sectors are listed in

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Table S2.

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3.2 Regional economic and environmental inequity hidden in China’s export

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Environmental burden and economic gains are the two sides of the same coin. China’s total national export contributed

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10,506 billion yuan (i.e. 19.5%) to China’s GDP and triggered 11,259 Gg APE emissions, constituting 24.1% of China’s

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territorial APE emissions. Figure 2 depicts regional export-related and territorial economic gains and air pollutants

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emissions. Export in East Coast and South Coast, the two biggest exporters, contributed 3,672 and 2,928 billion yuan,

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35% and 28% of total national export-related GDP, respectively, which actually occurred in all eight regions (i.e. territorial

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GDP). Export-related APE emissions in these two regions accounted for 3,275 and 2,589 Gg, i.e. 29% and 23% of national

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export-related APE emissions, respectively. Whereas export in Central and Northwest generated only about 9% and 4%

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of national export-related GDP, respectively, their share of export-related APE emissions was 12% and 9%, respectively.

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Similar patterns can also be observed in Southwest, Northeast and North Coast reflecting regional specialization in the

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production of pollution-intensive products, such as steel, chemical, cement, for local exports and intermediate inputs to 7



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support other regions’ exports. In contrast, the contribution of the richer East Coast and South Coast is higher than their

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share of export-related APE emissions. In 2012, territorial GDP in East Coast, South Coast and Beijing-Tianjin induced

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by exports reached 5,885 billion yuan, accounting for about 56% of territorial GDP, while their territorial APE from

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exports accounted only for 3,174 Gg or 28% of the total territorial APE emissions. In other words, the remaining five

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regions received only 44% of territorial GDP but incurred 72% (8,085 Gg) of territorial APE (as shown in Figure 2).

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Above-mentioned results can be attributed to the fact that the exported products of the rich regions were mostly higher

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value-added products such as electronic and electrical equipment, clothing, chemical products and services.

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Figure 2. Flow network of export-related GDP and APE from export regions to upstream regions along with cross-regional supply chains. The export-related GDP or APE represents the total GDP or APE induced by one region’s final export products, including GDP or APE occurring domestically and in upstream regions providing intermediate products; territorial GDP or APE denotes the total GDP or APE occurring in one region, including GDP or APE embodied in local exports and intermediate inputs to support other regions’ exports. The percentage indicates each region’s share of national total, respectively. The arrow from export-related GDP or APE to territorial GDP or APE indicates one region’s territorial GDP or APE attributable to all regions’ export-related GDP or APE through domestic supply chains. China’s 30 provinces have been grouped into eight geographical regions for presentation purposes (see Table S3).

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Figure 3a shows the matrix of AG index, i.e. export-related APE emissions per unit of export-related value added,

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among eight regions induced by each region’s export, the range of which are from 0.4 to 4.0 g/yuan. The highest AG

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values occurred in trade flows from Northeast to Northwest and Beijing-Tianjin to the Northwest (4.0 g/yuan and 3.7

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g/yuan, respectively). The average values of Beijing-Tianjin (0.4 g/yuan), East Coast (0.5 g/yuan) and South Coast (0.6

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g/yuan) are generally smaller than other regions when reading down the column, indicating that these rich regions incurred

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only 0.4 g, 0.5 g and 0.6 g APE emissions per yuan of export-related GDP. In contrast, the average values of Northwest

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(3.2 g/yuan), Central (1.9 g/yuan) and Southwest (1.7 g/yuan) are significantly larger, indicating that these poor regions

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had to suffer approximately 4 to 8 fold the amount of APE emissions per unit of export-related GDP than coastal regions.

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When reading along the rows of Figure 3a we see the amount of APE emissions per unit of export-related GDP in the

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focal region. According to this analysis, Northwest was not only the largest polluter but also the largest outsourcing region 8


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of export-related pollution, whereby other regions, especially in central and western China, had to suffer 2.5 g APE

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emissions per yuan for providing inputs to Northwest’s export. The reason lies in the type of intermediate products

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exchanged between Northwest and other regions, which were mainly high pollution- or energy-intensive products, such

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as metal and non-metal product, chemical products and electricity (Figure 3Figure 3b). As the main outsourced

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intermediate products, supplied electricity for other regions induced 937Gg APE emissions in Northwest, accounted for

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37% of total APE emissions embodied in Northwest’s imported intermediate products (Figure S4 in SI), and similar

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results can also be found in other studies44, 45. In conclusion, richer coastal regions suffered less emissions than inland

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regions whether they were exporters of final products or producers of intermediate products.

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Figure 3. The matrix of AG index among eight regions (a) and products exchange between Northwest and China’s other regions at 9



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sector level (b). In (a), the horizontal axis represents the AG index outsourced from other regions to the focal region; the vertical axis shows the AG index outsourced from the focal region to other regions. The diagonal refers to the AG index locally. Darker colors signify higher values of AG index referring to the amount of emissions per unit of direct and indirect export-related value added. In (b), left panel shows the monetary value of each sector’s products outsourced from Northwest to other regions; right panel shows the monetary value of each sector’s products consumed by Northwest and provided by other regions.

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3.3 Economic and environmental inequity in six major coastal provinces

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To further present the detailed economic and environment inequity in China, we depicted GDP gains and environmental

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loss in terms of APE emissions from regional export in the six major coastal provinces, as shown in Figure 4Figure 4. In

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2012, the six major export provinces, Guangdong, Fujian, Zhejiang, Shanghai, Jiangsu and Shandong, accounted for

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7,487 billion yuan, i.e. 71.3% of national export-related GDP, with approximately 6,762 Gg induced APE emissions,

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accounting for 60% of the total. While 65% of export-related GDP were kept in these six major export provinces, they

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outsourced about 60.6% export-related APE emissions to other regions. Guangdong produced the largest export-related

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GDP (2,450 billion yuan) and export-related APE emissions (2,129 Gg) in 2012, reaching about 23.3% and 22.7% of

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national total, respectively. Shanghai, the biggest beneficiary in international export, transferred about 74% of export-

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related APE emissions while only outsourced 26% of export-related GDP to other regions owing to its highly-developed

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service sectors such as the financial sectors. In comparison, Shandong, a typical north coastal province with high

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concentration of heavy industry, created the least economic and environmental imbalance, keeping about 70% and of 56%

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of its export-related GDP and APE emissions, locally.

10


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Figure 4. Comparison of outsourced APE, GDP and related AG index from China’s biggest six exporters, i.e., Guangdong(a), Fujian(b), Zhejiang(c), Shanghai(d), Jiangsu(e) and Shandong(f). The red and green columnar represent GDP and APE outsourced from colored coastal province to other provinces through domestic supply chains. Grey shades represent the AG index. The higher the index, the more APE emissions are outsourced per unit of export-related GDP.

260

On the other hand, provinces located in Central and Northwest and with high concentration on production of heavy and

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energy-related products were the main destinations of export-induced APE emissions because of the supply of

262

intermediate commodities for coastal provinces’ exports, such as Henan, Hebei, Shanxi, Inner Mongolia, Guizhou. Owing 11



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to the specialization in the production of exports with high value added, coastal provinces were the main destinations of

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export-related GDP. For example, among transferred export-related GDP and export-related APE emissions from

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Guangdong and Fujian, Shandong obtained the highest share (4.5% and 5.7%, respectively). The two biggest coal bases

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(Shanxi and Inner Mongolia) and the biggest primary industrial producer (Hebei) contributed the largest share of export-

267

related APE emissions for inputs to East Coast exports (5.8%, 6.4% and 5.9% respectively).

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By specializing in high-value added and low-emission exports, AG index of the six major export provinces were both

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lower than 1 g/yuan. In contrast, the AG index for Central, Northeast, Sichuan, Chongqing in the western regions, had a

270

range 1~3 g/yuan, indicating that more export-related APE emissions occurred while earning per unit of export-related

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GDP; and, most provinces in Northwest and Southwest have an AG index of higher than 3 g/yuan. These regions were

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disadvantaged in interregional trade by obtaining less economic benefits and high environmental costs. For example, by

273

contributing to the export of the six major export provinces, Ningxia incurred about 7~9 g export-related APE emissions

274

per yuan of export benefits, suffering the largest economic and environmental inequity.

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3.4 Disproportions of export-related APE and GDP at sectoral level within two typical provinces

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Figure 5 compares the direct and indirect APE emissions and value added caused by the export of Guangdong’s

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electronic products and Ningxia’s metal products. As the largest exporter in 2012, Guangdong’s export specialized in

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electronic equipment, constituting about 37% of its total exports. The export of electronic equipment contributed about

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209 billion yuan value added for Guangdong, with only 3 Gg sectoral APE emissions, locally. In order to provide

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intermediate products for the production of electronic equipment, other sectors in Guangdong gained more than 275

281

billion yuan of export-related value added. On the other hand, electronics equipment also led to extra 133 Gg APE

282

emissions to Guangdong’s other sectors, mainly electricity and heat, metal and non-metal products, and transportation.

283

In sum, Guangdong earned 484 billion yuan (67% of export-related value added) from the export of electronic equipment

284

and only suffered 136 Gg, 27% of the export-related APE emissions, locally. The outsourced emissions (363 Gg) mainly

285

occurred in the less developed Central, Northwest, Southwest regions (accounting for 67% of outsourced emissions),

286

however, these regions only obtained 48% of the outsourced export-related value added. The developed regions (Beijing-

287

Tianjin, South Coast and East Coast) gained more than half of the outsourced value added from Guangdong’s export of

288

electronic equipment and only incurred 33% of induced APE emissions. The above disproportion between export-related

289

APE and GDP are reflected more directly by the AG index, as shown in Figure 5a. The AG index of three less developed

290

regions are from 1.7~3.3 g/yuan, which are approximately 4~5 fold of developed regions such as Guangdong. Generally,

291

Guangdong has grabbed the major value added from the export of electronic equipment, while shifting most of the related

292

emissions to other regions, especially the less developed central and western regions.

12


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293 294 295 296

Figure 5. Direct and indirect APE and value added caused by the export of Guangdong’s electronic products (a) and Ningxia’s metal products(b). Note that South Coast within (a) does not include Guangdong, and Northwest within (b) does not include Ningxia. MRIO’s 30 sectors are further combined to 10 sectors for presentation purposes (see Table S4 in SI).

297

As the smallest inland exporter, Ningxia’s export only contributed 0.1% (15 billion yuan) of the national total in 2012.

298

The largest export sector in Ningxia was melt products, which contributed about 18% of Ningxia’s total export and

299

directly produced about 486 million yuan value added as well as 2,911 Mg APE emissions, within the province.

300

Furthermore, to support Ningxia’s export of melt products, about 454 million yuan induced value added were achieved

301

by other sectors, mainly including Metal and non-metal products, Services, Electricity and heat, and Mining products in

302

Ningxia. Simultaneously, 3,684 Gg APE concentrated in the same sectors were emitted in Ningxia. As a whole, Ningxia

303

kept about only 48% of export-related value added from the export of Melt smelting and incurred 77% of associated APE

304

emissions locally. The outsourced value added from Ningxia mainly occurred in other northwestern provinces, Central, 13



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305

as well as richer North and East Coast. Obviously, almost all other regions shared the outsourced value added (2,020

306

million yuan) to varying degrees, as shown in Figure 5b. However, less developed regions (Northwest, Central, Southwest

307

and North) received 86% of Ningxia’s outsourced APE when they provided their pollution-intensive upstream products,

308

like electricity, metal and non-metal products for Ningxia. The AG index of Ningxia’s Metal products and other sectors

309

are up to 6.0 and 8.1 g/yuan, respectively, which means Ningxia incurred more emissions than other regions when

310

obtaining equivalent value added. Other less developed regions also incurred more emissions than developed coastal

311

regions per unit export-related value added from Ningxia’s export of metal products due to their heavy industry.

312

4. Policy implications

313

Export has partly intensified the regional economic and environmental inequity within China. At present, China is still

314

stuck at the bottom of global “Smiling Curve” 46,47, referring to the distribution of value added across the different stages

315

in the global value chain, with higher shares of value added at both ends of the production chain and lower value added

316

for the manufacturing sections in the middle of the curve. For example, along the global supply chain of Apple products,

317

349 out of 785 global suppliers are in China, while the core high-tech components are mainly imported from Japan and

318

Korea. China can only obtain less than 4% of the total profits in the production of iPhone, while the USA, Japan and

319

Korea are able to extract most of the profit owing to their design and high-tech contributions to the global supply chains

320

48, 49

321

have been given preferential development with government support adding to historical development advantage as well

322

as proximity to harbors and export opportunities, and have thus gained large volume of export and rapid economic growth.

323

Since 2000, Chinese government has proposed the “West Development” and “Northeast Area Revitalization Plan” to

324

accelerate inland regions’ economic growth. However, they are still stuck in an inferior position in the national value

325

chain. On the one hand, regional resource endowment has made some provinces in central and western regions become

326

the energy base, such as Shanxi, Inner Mongolia, providing low value added, high pollution inputs. On the other hand,

327

their less strict environmental regulation has attracted emission-intensive but low value added enterprises from coastal

328

regions 10. As a consequence, inner regions have gained lower shares of value added but larger shares of air pollution than

329

coastal regions in the national export as shown in our findings.

. A similar phenomenon can also be observed within China. Since the reform and opening-up in China, coastal regions

330

There is still much to be done to reduce the regional economic and environmental inequity from export production,

331

especially under the background that China’s exports are increasingly moving from developed countries towards

332

developing countries50. On the one hand, export from central and western regions are much lower than that in coastal

333

regions due to historic reasons and distance from global transport hubs. Therefore, central and western regions in China

334

should boost their international trade with Southeast Asia, Central and Eastern Europe, and North Africa via the

335

opportunity of the “Belt and Road Initiatives” (proposed by Chinese government in 2013), which may lighten the unequal

336

exchange along domestic supply chains. If the portfolio of exported products would change due to new export destinations,

337

differential pollution mitigation policies are also required to change the current division of labor and thus distribution of

338

costs and benefits. On the other hand, central and western regions should accelerate the transformation of regional

339

industrial structure, optimize export structure and transform from “Made in China” to “Made with Wisdom”. Specifically, 14


Page 15 of 18


340

interior regions, specializing in heavy industry and extraction of natural resources, should gradually be transformed to the

341

development of intelligent manufacturing equipment and products with higher value-added but lower emissions, relying

342

on regional natural endowment and competitive advantage. Moreover, traditional heavy industry sectors, such as

343

production of non-metallic mineral products, smelting and processing of metals, metal products and chemical industry,

344

should be encouraged to transform towards more automatic, integrated and intelligent manufacturing to achieve greener

345

and higher value added manufacturing in central and western regions. Since outsourcing of heavy industry is a zero sum

346

game, the remaining heavy industry sectors need to employ the latest technology and produce with least pollution and

347

consider transport emissions incurred by shipment to demand centers.

348

In addition, central government’s air pollution targets are assigned to regions based on levels of air quality in China.

349

However, as shown in this paper, poor air quality in one region may be partly caused by other regions’ consumption.

350

Therefore, interregional eco-compensation for air pollution control from coastal regions to inland regions should be

351

established to promote joint efforts in China’s regional emission control

352

internalized in commodity prices through environmental taxation or the recently established interregional air emission

353

trading market, which can be used to finance pollution abatement in less developed regions. Last but not the least,

354

consumption-based accounting highlights the important role of all stakeholders along global supply chains and in

355

particular the consumers and their environmental responsibility. In international trade, China should be integrated with

356

its main trade partners in international agreements to encourage cross-boundary collaboration, technology transfer, further

357

efficiency improvements and emission abatement know-how throughout global supply chains. MRIO and similar tools

358

can help identify global emission hot spots

359

chain analysis to manage their supply chains sustainability, ensure quality control, and resource security. Such global

360

supply chain analyses can complement stakeholder identification processes aimed to better understand multi-level

361

systems such as global supply chains and their broad institutional environments, which aids NGOs, researchers, decision-

362

makers and practitioners make more knowledgeable decisions and their present and potential responsibilities and roles 52.

363

Finally, information about cumulative environmental and social impacts along global supply chains can add consumers

364

in making informed decisions and consider other relevant criteria in their purchase decisions.

51

7, 10

. Furthermore, pollution cost should be

and design least cost interventions. Similarly, enterprises can use supply

365

Supporting Information

366 367

The detailed information about China’s MRIO table in 2012, sectoral air pollutant emission inventory and methodology

368

on the calculation of APE are presented in Supporting Information, which is available free of charge on the ACS

369

Publications website at DOI:

Corresponding author

370 371 372

*

E-mail: [email protected](J. Wang), [email protected](J. Bi).

Author Contributions 15



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373

W. Zhang, F. Wang, J. Wang and J. Bi designed the study. W. Zhang, F. Wang, K. Hubacek and K. Feng performed the

374

analysis and drew the figures. Y. Liu compiled 2012 China MRIO table. W. Zhang compiled sectoral air pollutant emission

375

inventories. All authors participated in the writing of the manuscript. ‡W. Zhang. and F. Wang contributed equally to this

376

work.

377

Acknowledgments

378

This work was supported by the National Science Foundation of China (Grants 71603097, 71433007 and 71373294). W.

379

Zhang is supported by a scholarship from the Peking University-Lincoln Institute Centre for Urban Development and

380

Land Policy. W. Zhang and F. Wang are supported by the Outstanding PhD Candidate Program of Nanjing University

381

(201601B009, 201601B011).

382 383

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