Heterogeneous Sourcing, CO2 Emissions, and Exporting

Abstract: International trade reshapes the geography of CO2 emissions, decoupling the location of production from final consumption. While a substantial share of emissions is embodied in traded goods, existing firm-level studies on the exporter’s environmental premium (EEP) focus predominantly on direct production emissions. Since sourcing patterns vary systematically across firms, this omission may distort the perceived environmental advantage of exporters. We address this gap using a novel dataset that links administrative records, firm-level customs data, and environmentally extended input-output tables to trace CO2 emissions across global supply chains. Our findings reveal that more than half of firm-level emissions stem from embodied emissions in intermediate inputs. Moreover, once indirect emissions are included, the exporter’s environmental premium reverses: while exporters appear cleaner based on direct emissions, they exhibit higher total emissions intensity once sourcing-related emissions are accounted for. These results challenge the conventional view that trade liberalization reduces emissions through reallocation to cleaner firms and underscore the need to incorporate firm-level sourcing behavior into trade and environment analyses.

Further information on the Economics Research Seminar can be found here. 

Author: Responsible: Thomas Steger