Imports and the CO2 emissions of firms

We explore how importing of intermediate goods affects the carbon intensity of firms in the Swedish manufacturing sector. By exploiting exogenous shocks to foreign export supply of intermediate goods, we estimate that a 10 percent increase in imports causes a 5.6 percent reduction in carbon intensity. Average carbon intensity among the firms in our sample between 2004 and 2016 decreased by around 50 percent, and our results suggest that import growth accounted for about a third of this decline. Exploring the mechanisms, we find evidence for both a technique effect and a product composition effect. Importing has a positive impact on productivity, scale of production, and abatement investments. It also encourages firms to focus more on their core products. We find no evidence for a pollution haven effect.