Will Trade Protection Trigger a Surge in Investment-Related CO2 Emissions? Evidence from Multi-Regional Input–Output Model

Abstract

Current research has revealed that global trade promotes transnational investment and contributes to large amounts of CO2 emissions. Recently, trade protectionism has gradually emerged. This study aims to explore the effect of global trade protection on investment-related CO2 emissions. We construct an accounting framework for investment-related CO2 emissions under trade freedom and trade restriction based on the MRIO model for the first time, and investment-related CO2 emissions in 16 economies are determined in both trade freedom and trade restriction scenarios. The study uses normal trade and no-trade scenarios instead of free trade and restricted trade scenarios. Then, based on the comparison of the two scenarios, the effect of global trade protection on investment-related CO2 emissions is revealed from the three levels of country, section, and trade links. It is found that global trade protection would lead to an increase of up to 546.17 million tons in investment-related CO2 emissions under current trade structures. Transnational investment in the trade of end-stage intermediary goods contributed 81.6% of the total effect. In terms of countries, trade protection is quite disadvantageous to CO2 emission reduction in China and India, and their CO2 emissions would respectively increase by 105 million tons and 141.5 million tons compared to normal trade. The electricity, gas, and water supply sectors and the manufacturing sector are the main sectors for investment-related CO2 emissions. This study reveals the effect of trade freedom and trade protection on the environment of various countries from the viewpoint of investment-related CO2 emissions, which has important reference value for global CO2 emission reduction in the context of the evolving trade situation.