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Decarbonization or Carbon Outsourcing? The Effect of Commodity Price Movements Across Industries

Author

Listed:
  • Olayinka Oyekola

    (Department of Economics, University of Exeter)

  • Mingyuan Chen

    (Department of Economics, University of Exeter)

  • Diego Morris

    (Department of Management, University of Birmingham)

Abstract

Using a panel of nine manufacturing industries in 43 economies over the period 1990-2015, we examine how international commodity price movements affect carbon emissions across industries. We find that commodity price movements are associated with larger reductions in emissions intensity in physical-capital-intensive industries, whereas the emissions response does not vary systematically with human capital intensity. The results are economically meaningful and robust. The evidence points to cross-industry reallocation as the dominant adjustment channel, with commodity price movements associated with lower value-added growth in physical-capital-intensive industries, whereas the evidence for within-industry emissions-efficiency improvements is weaker. We further show that industries experiencing larger declines in domestic emissions intensity also exhibit larger increases in emissions embodied in imports, suggesting some relocation of emissions-intensive production across borders. Overall, commodity price movements appear to support domestic decarbonization while raising concerns about carbon outsourcing.

Suggested Citation

  • Olayinka Oyekola & Mingyuan Chen & Diego Morris, 2026. "Decarbonization or Carbon Outsourcing? The Effect of Commodity Price Movements Across Industries," Discussion Papers 2606, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:2606
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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