Brown Bag Seminar Industrial Economics

This paper studies how firms’ CO2 emission intensity (CEI) responds to trade shocks. I develop a unified framework that decomposes within-firm changes in CEI into three components: shifts in (i) the product portfolio, (ii) factor-neutral physical productivity (TFPQ), and (iii) CO2-abatement technology, defined as factor-augmenting productivity that reduces emissions relative to other inputs. The framework yields firm-level, non-parametric estimates of the effects of changes in trade exposure on these productivities. Using data on German manufacturing firms between 1995 and 2008, and exploiting exogenous variation in exposure to trade integration with Eastern Europe and China, I investigate how export expansion and import competition affect CEI. Cross-sectional heterogeneity in CEI is primarily driven by abatement Technology rather than TFPQ. Over time, firms become cleaner mainly through TFPQ gains and portfolio shifts, while the abatement component deteriorates, consistent with productivity-enhancing but energy-intensive upgrades. Export expansion induces this pattern in technology, whereas stronger import competition reduces abatement, consistently with scale losses, yet reallocates production toward cleaner core products. Effects are heterogeneous across firms with different initial productivity levels.