Clean Production, Dirty Sourcing: How Embodied Emissions Alter the Environmental Footprint of Exporters

Till Köveker, Philipp M. Richter, Alexander Schiersch and Robin Sogalla

No 2126, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper revisits the exporter’s environmental premium (EEP) by incorporating emissions embodied in domestically and internationally sourced intermediate inputs. Combining administrative firm-level data and customs records for German manufacturers with an environmentally extended input-output table and fuel specific emission factors, we document three stylized facts: (i) embodied emissions account for over half of firms’ total emissions; (ii) exporters’ production involves disproportionately more embodied emissions, particularly through international sourcing; and (iii) once embodied emissions are considered, the EEP reverses: exporters appear cleaner based on production-related emissions alone, but dirtier in total emissions. We rationalize these patterns in a sourcing model and test its predictions using a shift-share IV strategy based on foreign demand shocks. Export expansion lowers the production-related emission intensity without affecting total emissions, underscoring the role of sourcing in shaping firm-level environmental outcomes. These findings highlight the importance of accounting for embodied emissions when evaluating the welfare and environmental consequences of trade liberalization.

Keywords: Exporter’s environmental premium; CO2 emission intensity; embodied emissions; international sourcing; heterogeneous firms (search for similar items in EconPapers)
JEL-codes: F12 F18 L23 Q54 Q56 (search for similar items in EconPapers)
Pages: 50 p.
Date: 2025
New Economics Papers: this item is included in nep-ene and nep-env
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