CO2 Emission Intensity and Exporting: Evidence from Firm-Level Data

Abstract

This paper analyses whether exporting firms are less CO2 emission-intensive than non-exporting competitors. It exploits a novel and unique dataset for Germany, a major exporting country. Due to the direct link between CO2 emissions and fuels consumed, we argue that it is necessary to employ a production function framework to consistently analyse CO2 emission intensity. We show that such an approach solves the issue of omitted variable bias that standard regressions approaches on CO2 emission intensity of firms are exposed to. Furthermore, it enables us to apply latest econometric techniques from the productivity literature to resolve the endogeneity problem of unobserved productivity and to include a measure of export activity into the estimation. Our findings suggest a positive relation between export intensity and CO2 productivity—the inverse of emission intensity. This exporter’s environmental premium holds for most of the German manufacturing industries at the two-digit level.