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Imports and the CO2 Emissions of Firms

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  • Forslid, Rikard
  • ,
  • Prane, Ossian

Abstract

In this paper we explore how importing of intermediate goods affect the carbon intensity of firms in the Swedish manufacturing sector. By exploiting exogenous shocks in foreign export supply of intermediate goods, we estimate that a 10 percent increase in imports causes a 5 percent reduction in carbon intensity. Contrary to popular beliefs, we also find that most of this effect cannot be explained by offshoring of dirty stages of the production process. Instead, a mediation analysis suggests that the productivity-enhancing effect of importing is a more important driver of the reduction in firms’ carbon intensity. To account for general equilibrium effects we also develop a model in which heterogeneous firms make endogenous decisions regarding production, importing and emissions. A calibration of this model based on our empirical results suggests that the elasticity of aggregate carbon emissions with respect to import trade costs is about 0.17.

Suggested Citation

  • Forslid, Rikard & , & Prane, Ossian, 2021. "Imports and the CO2 Emissions of Firms," CEPR Discussion Papers 16090, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16090
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    More about this item

    Keywords

    International trade; Importing; Carbon emissions; Carbon leakage;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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