Abstract:Using the improved input-output model and Structural Decomposition Analysis (SDA), it dynamically analyzed transfer of polluting industries between the two countries, the driving factors of "embodied carbon", mutual relations between vertical specialization rate and "embodied carbon" from 1995 to 2011, based on NETXC and vertical specialization rate. The result shows that China has not become the "polluter paradise", Japan mainly transferred high-middle carbon intensity industries to China, including chemical industries, mining and quarrying industries, other non-metal mineral industries, transport equipment industries, machinery industries. While China mainly transferred middle-low carbon intensity industries to Japan, including wood and products of wood and cork industries, other machinery industries. The SDA analysis revealed that energy effect and intermediate technology effect decreased respectively -170.12% and -6.37% embodied carbon of China export to Japan. Scale effect and structure effect respectively increased 158.06% and 39.54% “embodied carbon” of China export to Japan. There was a significant positive correlation between vertical specialization rate and "embodied carbon", vertical specialization rate increased by 1 %, "embodied carbon" in exports increased 0.974%.