Foreign Demand, Developing Country Exports, and CO2 Emissions: Firm-Level Evidence from India

Hélène Ollivier and Geoffrey Barrows ()
Additional contact information
Geoffrey Barrows: CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], X - École polytechnique - IP Paris - Institut Polytechnique de Paris

Post-Print from HAL

Abstract: With asymmetric climate policies, regulation in one country can be undercut by missions growth in another. Previous research finds evidence that regulation erodes the competitiveness of domestic firms and leads to higher imports, but increased imports need not imply increased emissions if domestic sales are jointly determined with export sales or if emission intensity of manufacturing adjusts endogenously to foreign demand. In this paper, we estimate for the first time how production and emissions of manufacturing firms in one country respond to foreign demand shocks in trading partner markets. Using a panel of large Indian manufacturers and an instrumental variable strategy, we find that foreign demand growth leads to higher exports, domestic sales, production, and CO2 emissions, and slightly lower emission intensity. The results imply that a representative exporter facing the average observed foreign demand growth over the period 1995-2011 would have increased CO2 emissions by 1.39% annually as a result of foreign demand growth, which translates into 6.69% total increase in CO2 emissions from Indian manufacturing over the period. Breaking down emission intensity reduction into component channels, we find some evidence of product-mix effects, but fail to reject the null of no change in technology. Back of the envelope calculations indicate that environmental regulation that doubles energy prices world-wide (except in India) would only increase CO2 emissions from India by 1.5%. Thus, while leakage fears are legitimate, the magnitude appears fairly small in the context of India.

Keywords: Globalization; Trade and environment; Product mix; Technological change (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03029861v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published in Journal of Development Economics, 2021, 149, ⟨10.1016/j.jdeveco.2020.102587⟩

Downloads: (external link)
https://shs.hal.science/halshs-03029861v1/document (application/pdf)

Related works:
Journal Article: Foreign demand, developing country exports, and CO2 emissions: Firm-level evidence from India (2021)
Working Paper: Foreign Demand, Developing Country Exports, and CO2 Emissions: Firm-Level Evidence from India (2021)
Working Paper: Foreign Demand, Developing Country Exports, and CO2 Emissions: Firm-Level Evidence from India (2020)
Working Paper: Foreign Demand, Developing Country Exports, and CO2 Emissions: Firm-Level Evidence from India (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03029861

DOI: 10.1016/j.jdeveco.2020.102587

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().