ASIAN DEVELOPMENT BANK 

ASIAN ECONOMIC INTEGRATION REPORT 2024

DECARBONIZING GLOBAL VALUE CHAINS

FEBRUARY 2024

This report primarily focuses on how to achieve a reduction in carbon emissions in global value chains (GVCs) while maintaining economic benefits. The report highlights that GVCs embed significant amounts of carbon emissions across various stages such as production, transportation, and distribution. This is especially in the context of Asia's rapid industrialization and economic growth, which has led to the region accounting for an increasingly large share of global carbon emissions. Although the carbon intensity of production has decreased, overall emissions continue to rise due to the expansion of production scale. The report emphasizes the following key measures for decarbonizing GVCs:

Carbon Pricing: By implementing carbon taxes or emissions trading systems (ETS), the social costs of carbon emissions can be internalized, providing incentives for businesses to reduce carbon intensity and adopt cleaner production methods.

Embedding Emissions Accounting Mechanisms: To effectively reduce emissions, it is critical to establish a comprehensive embedded emissions accounting framework. This will help measure the carbon emissions implied in various products and services, leading to more precise policy development.

Global Cooperation: Given the global nature of climate change, enhanced coordination and cooperation among countries are necessary. Particularly, technology transfer between developed and developing countries is vital for achieving sustainable green development.

Technological Upgrading and Transfer: Promoting the research, development, and dissemination of green technologies, especially through multinational enterprises and GVCs to accelerate the diffusion of green technologies to developing countries, thereby reducing carbon emissions.

The report also explores the potential impact on Asian countries' exports, particularly in high-carbon industries such as steel and cement. Asian countries may face the challenge of rising export costs. While mechanisms like the Carbon Border Adjustment Mechanism (CBAM) help reduce carbon leakage, their overall impact on global emission reductions remains limited.