GEOPOLITICAL RISKS, GLOBAL VALUE CHAINS, AND CO2 EMISSIONS: AN EMPIRICAL ANALYSIS OF DEVELOPED AND DEVELOPING ECONOMIES

Abstract

This study investigates the indirect environmental impact of geopolitical risk through global value chain (GVC) participation. Using Structural Equation Modeling, it estimates how global geopolitical risk affects CO2 emissions via disruptions in GVCs across 52 countries from 2001 to 2020. Results show that geopolitical risk reduces GVC participation, which raises emissions in developed economies but lowers them in developing ones. The contrasting effects reflect differences in countries' positions within global value chains in terms of carbon-intensive activities and the stringency of environmental regulations across country groups. The findings highlight GVCs as a critical mediating channel linking geopolitical instability to environmental outcomes.