Deep and Shallow Decarbonization in Supply Chains

Anne Beck and Alvaro Pedraza

No 11306, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines how suppliers adjust their decarbonization choices when major customers obtain validated emission-reduction targets. Using global supplier-customer links matched to firm-level emissions and project-level data from voluntary carbon registries, the analysis shows that downstream climate pressure elicits both real and symbolic responses, but in systematically different ways across suppliers. On average, treated suppliers become more likely to adopt climate targets of their own. High-emission suppliers subsequently reduce their emission intensity relative to comparable firms, indicating meaningful operational adjustments. Low-emission suppliers, by contrast, do not further reduce emissions; instead, they expand their use of carbon credits, sharply increasing offset intensity as a lower-cost alternative to additional physical abatement. These offsets disproportionately originate from lower-rated projects, suggesting that increased demand does not translate into pressure for higher-quality credits. Overall, downstream climate commitments induce a sorting in decarbonization strategies: high-emission suppliers undertake substantive reductions, while low-emission suppliers rely more heavily on market-based mechanisms to meet customer expectations.

Date: 2026-02-09
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