Why are firms that export cleaner? International trade, abatement and environmental emissions

By R. Forslid, Toshihiro Okubo, K. H. Ulltveit-Moe. Journal of Environmental Economics and Management, 2018

305 citations recorded by the source corpus.

This paper proposes a detailed mechanism for why exporting firms may have a lower emission intensity when emissions are subject to an environmental tax. This mechanism of our model is supported by Swedish firm-level data. Our mechanism runs through firms' endogenous investments in abatement. Firms' abatement investments depend on their production volumes, since a larger scale allows them to spread the fixed costs of abatement investment across more units. Production volumes increase in firm productivity and, as a consequence, firms' emission intensity is negatively related to firm productivity. Exporting also leads to higher production volumes and thereby to a lower emission intensity. Thus, trade has an effect on emissions independently of firm productivity. Trade therefore leads to higher but cleaner production. The overall effect of trade on emissions is neutral in our model. Trade liberalization does not affect aggregate emissions in our benchmark case of symmetric countries.

Subfields: Economics and Econometrics, Environmental Engineering

View Paper: https://www.semanticscholar.org/paper/3032c91e842ae595a79e063eb3394bb14bd83784

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Citations in the corpus

Economic policy uncertainty (EPU) and firm carbon emissions: Evidence using a China provincial EPU index (2020, background): “Forslid et al. (2018) theoretically explained that firms’ endogenous abatement investment is a key mechanism for achieving lower emission intensity in exporting firms when emissions are taxed and empirically demonstrated by Swedish firm-level data.”
Trade, pollution and mortality in China (2016, unknown): “Borrowing the language of Grossman and Krueger (1995) and Copeland and Taylor (2003), PollutionExportShock captures a “scale” effect: prefectures that experience a larger increase in exports in dirty industries are expected to see their pollution increase.”
Trade and the Environment: New Methods, Measurements, and Results (2017, unknown): “See for example Yokoo (2009), Cui (2014), Forslid et al. (2015), Kreickemeier & Richter (2014), Cole et al. (2014), Ravetti & Baldwin (2014), Konishi & Tarui (2015), and Barrows & Ollivier (2016). where δ < 1, aj > 0, and bj > 0.”
The effects of environmental innovations on CO2 emissions: Empirical evidence from Europe (2021, background): “While economic openness is conducive to reducing carbon emissions and enhancing efficiency in developed countries (Forslid et al. 2018), for developing countries, it tends to increase CO2 emissions (Acheampong et al. 2019).”