Promoting energy and environmental efficiency within a positive feedback loop: Insights from global value chain

Promoting energy and environmental efficiency is widely believed to be one of central issues in China's sustainable development. After entering into World Trade Organization in 2001, China has accelerated to become an extroverted economy through international openness. In the global specialization, a Global Value Chain (GVC) has been formed across economies. China has become an active player in this regard but stood in low value-added positions, which has been called “the world's factory”. Manufacturing products for the whole world leads to the explosive growth of China's energy consumption and CO₂ emissions after 2003, but enterprises can also learn from developed countries due to diffusion of technology and managerial experience. By far, the precise role of China's moving-up GVC in its energy and environmental efficiency is still unknown. This paper conducts an empirical analysis on this issue by measuring the position of China's industries in GVC and their energy and environmental efficiency as well, and then setting up mixed simultaneous equations containing a Tobit model. The results show a positive feedback loop between GVC positions and energy and environmental efficiency. We further find rise in GVC positions accounts for 35% of energy and environmental efficiency improvement over the sample period.