Working Paper: CEPR ID: DP16090
Authors: Rikard Forslid; Anders Akerman; Ossian Prane
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.
Keywords: international trade; importing; carbon emissions; carbon leakage
JEL Codes: F12; F15; F61; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 10 percent increase in imports (F10) | 5 percent reduction in carbon intensity (L94) |
| 10 percent increase in imports (F10) | increase in firm-level productivity (D21) |
| increase in firm-level productivity (D21) | reduction in carbon intensity (Q48) |
| 10 percent increase in imports (F10) | changes in product mix produced by firms (D21) |
| 10 percent trade liberalization (F19) | 17 percent decrease in emissions (F64) |