Temporal Change of China's Pollution Terms of Trade and its Determinants

Based on the World Input-Output Database (WIOD), this study employed a revised pollution terms of trade (PTT) indicator to investigate the temporal change of China's environmental cost relative to its economic gains from international trade from 1995 to 2009. The results show that China has PTT larger than 1, indicating that China emits more emissions to obtain each unit of value-added from exports than its trade partners. Over the period, China's PTT first decreased from 1995 to 2001 and then increased from 2001 to 2009. The further decompositions show that improving technology is the leading driving force to decrease PTT, while the change in global trade pattern is the leading force increasing PTT, especially after 2001. We further decomposed the temporal change of China's PTT by income group of the trading partners. The results show that the change in the global trade pattern is the crucial driving force behind the different changes of PTT by income group.