Trade and the scopes of pollution: Evidence from China’s world market integration

Frank Pisch, Stefano Carattini, Hanwei Huang and Tejendra Pratap Singh

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Although the environmental impact of trade has been a long-standing concern, there is still scant evidence on the channels through which international market access affects pollution. We exploit the unique episode of China’s world market integration in the early 2000s to provide direct empirical evidence on three such mechanisms, corresponding to each pollution scope: direct pollution at firms’ locations (scope-1), indirect pollution from energy generation (scope-2), and indirect pollution from the supply chain (scope-3). We combine granular satellite data on air pollution with detailed information on manufacturing firms and coal power plants, and leverage exogenous foreign demand shocks for identification. Three main findings emerge: exporting firms reduce local pollution; pollution levels around coal power plants rise due to regional export shocks; and upstream suppliers reduce pollution in the face of export demand shocks to downstream firms. Our findings point to China’s reliance on coal power plants to fuel its export-driven growth as one of the main drivers of the rise in pollution.

Date: 2026-08
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Published in Journal of Environmental Economics and Management (2026-08)

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Related works:
Journal Article: Trade and the scopes of pollution: Evidence from China’s world market integration (2026)
Working Paper: Trade and the scopes of pollution: evidence from China's world market integration (2026)
Working Paper: Trade and the Scopes of Pollution: Evidence from China’s World Market Integration (2025)
Working Paper: Trade and the Scopes of Pollution: Evidence from China's World Market Integration (2025)
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