Global Firms and Emissions: Investigating the Dual Channels of Emissions Abatement

Jul 9, 2026

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The study examines how international trade affects firm environmental performance by linking firms’ import, export, and abatement choices in a single theoretical framework. The model shows complementarity between trading decisions and abatement investment, predicting that trading firms invest more in abatement technology and therefore achieve lower emission intensities. Using Chinese firm-level data with instrument variables to address endogeneity, the analysis finds that both importing and exporting reduce firm-level emission intensities by more than 15 percent.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages36

Reading Time1 h 31 min

Introduction

Research question and framework

Evidence on exporting and the gap on importing

Contributions and empirical strategy

| Global firms and emissions: Investigating the dual channels of emissions abatement✩ Ohyun Kwon a, Hao Zhao b,∗, Min Qiang Zhao c,1 a School of Economics, Drexel University LeBow College of Business, Philadelphia, USA b School of Environmental and Natural Resources, and Institute of Ecological Civilization, Renmin University of China, Beijing, China c MOE Key Laboratory of Econometrics, the Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, China | | | | | --- | --- | --- | --- | | A R T I C L E I N F O | | A B S T R A C T | | | JEL classification: D22 F18 Q56 Keywords: International trade Emissions China | | This paper finds that both importing and exporting reduce firm-level emission intensities. We develop a theoretical model in which firms jointly determine the extent of abatement investment as well as whether or not to import intermediate inputs and export final goods. The model demonstrates a complementarity between trading decisions and abatement investment such that trading firms invest more in abatement technology and feature lower emission intensities. Using Chinese firm-level data, we estimate a theory-based regression model with instrument variables to account for the endogeneity issue associated with firms’ trading statuses. Our regression results show that both importing and exporting reduce firm-level emission intensities by over 15 percent. | | 1. Introduction How does international trade impact firms’ environmental performance? In this paper, we answer this question with a model that links firms’ import, export, and abatement decisions in a single framework. Our theory suggests that firms have a greater incentive to invest in abatement technology when they become importers, exporters, or both, and hence their firm-level emission intensities, defined as mass of emissions normalized by the real value of output, decline in response to trade liberalization. Our empirical results confirm that both importing and exporting contributed to significant reduction of firm-level emission intensities in China in the first decade of the 21st century. Although voluminous studies have shown that exporting improves firm-level environmental outcomes (e.g., Holladay (2016), Forslid et al. (2018), Shapiro and Walker (2018), Rodrigue et al. (2022a)), there is scant evidence on whether importing also generatesa similar effect.2 Against this backdrop, our paper aims to instate the key role that importing plays in reducing firms’ emission intensities. Our contributions in this paper can be summarized as follows. First, we propose a theoretical model that elucidates how ✩ We thank Joel Rodrigue, Costas Syropoulos, Yoto Yotov, three anonymous referees and the editor for helpful comments. We are grateful to discussion with seminar participants at Annual Conference of Chinese Economist Society, Drexel University, North America Meeting of the Econometrics Society and Xiamen University. ∗ Corresponding author.School of Environmental and Natural Resources, Renmin University of China, No. 59, Zhongguancun Street, Beijing, 100872, PR China. E-mail addresses: [ok85@drexel.edu](ok85@drexel.edu) (O. Kwon), [haozhao@ruc.edu.cn](haozhao@ruc.edu.cn) (H. Zhao), [kent_zhao@xmu.edu.cn](kent_zhao@xmu.edu.cn) (M.Q. Zhao). 1 Zhao acknowledges financial support from the National Natural Science Foundation of China (No. 71773102). 2 One of the few papers that investigate the impact of importing on firm-level emissions is Cherniwchan (2017), who studies the effect of NAFTA on US firms’emissions. The key advantage of our paper is that we observe each firm’s importer status and imported products. We posit that importing is a key aspect of trade liberalization, since numerous studies have shown that importing has a strong implication on firms’ non-environmental outcomes, such as productivity (Amiti and Konings, 2007), R&D decisions (Bøler et al., 2015) and currency invoicing (Yang and Kwon, 2021

FAQs

How does the paper link international trade to firms’ environmental performance?

It presents a model that connects firms’ import, export, and abatement decisions within one framework, linking trade liberalization to changes in emission intensities.

What is the key theoretical mechanism behind the paper’s predictions?

Trading decisions and abatement investment are complementary: firms that import and/or export have stronger incentives to invest in abatement technology, leading to lower emissions per unit of output.

What do the empirical results show about importing and exporting?

Instrument-variable regression results using Chinese firm data indicate that both importing and exporting reduce firm-level emission intensities by over 15 percent.

Jul 9, 2026

Upload by Noah