CO2 emissions, environmental provisions and global value chains in MENA countries

Tunisia - 1 November 2020

Trade topics: Trade and Environment

The paper investigates the relationship between carbon emissions, environmental provisions in Regional Trade Agreements (RTAs) and Global Value Chains (GVCs) using a panel data gravity model for the Middle East and North Africa (MENA) region over the period 1990-2015. We find that RTAs have a positive effect on carbon emissions. However, good institutional quality in MENA region decreases carbon footprint. Participation of MENA countries in GVCs rises environmental degradation in upstream Low-Tech Manufacturing (LTM) sectors and downstream High-Tech Manufacturing (HTM) and Primary sectors. Moreover, we examine the interaction effects between RTAs with environmental laws and participation of MENA countries in GVCs. Results confirm that participating in upstream activities in GVCs and signing more RTAs with environmental laws reduce pollution in LTM sectors. Furthermore, our study proves that RTAs (with or without environmental laws) could reduce carbon emissions in MENA region participating in backward GVCs. Backward participation is related to trade in LTM and primary sectors. Therefore, there is a need to understand the GVC landscape in MENA region to be able to set suitable RTAs with environmental provisions in order to reduce pollution and contribute to sustainable upgrading in GVCs.

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