Rewiring Supply Chains Through Uncoordinated Climate Policy

Emanuela Benincasa, Olimpia Carradori, Miguel Ferreira and Emilia Garcia-Appendini

No 19676, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We show that climate transition risks can significantly disrupt supply chain networks. Specifically, suppliers affected by the California cap-and-trade program are more likely to lose customer relationships and less likely to form new ones compared to their competitors unaffected by the program. The effects are more pronounced among suppliers facing high competitive pressure and producing standardized inputs. Additionally, affected suppliers experience declines in revenues, assets, and profitability. This supply chain rewiring induced by uncoordinated climate policies is consistent with carbon leakage, as customers exposed to the program through production networks show an increase in their supply chain emission intensity.

Keywords: Climate finance; Carbon emissions; Supply chain; Product market competition; Input specificity (search for similar items in EconPapers)
JEL-codes: G32 Q54 Q55 (search for similar items in EconPapers)
Date: 2024-11
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