Research

We study the effects of market integration on manufacturing emission intensities of CO2, SOx, and NOx. For this, we analyse the 2004 and 2007 EU enlargements in a sectoral panel with data on almost all EU member states from 1995 to 2015. We pay close attention to relevant channels of trade, regulation, and efficiency. Overall, the enlargements have resulted in a reduction of emission intensities in new member states: new regulations, which accession countries needed to adopt, have lowered pollution intensities strongly; induced improvements in productivity have further reduced them; and trade integration into the EU has had insignificant effects on emission intensities. We also do not find evidence of within-EU pollution haven effects and thus of leakage from old to new member states. For old members, trade integration, if anything, increased emission intensities, but efficiency improvements have also contributed to cleaner manufacturing sectors here.

We study the effects of the EU Emissions Trading System (ETS) on employment and profits as well as on the investment decisions of Dutch manufacturing firms. Motivated both by sizable differences between firms that are regulated in different phases and by the gradual increase in regulatory stringency, we pay close attention to treatment effect heterogeneity between firms and over time. We use microdata from Statistics Netherlands to apply two difference-in-differences (DiD) estimators: (1) a matched two-way fixed effects regression and (2) a recently developed, more flexible DiD method, designed for staggered treatment and treatment effect heterogeneity. We find that firms that were first regulated in phase 1 and 2 experience temporary employment losses of between 7 to 9\% early in the regulation, but we do not find conclusive evidence for changes in profits. Firms that were regulated the earliest reduced their investments throughout all phases.

This paper estimates the effect of trade openness both on the domestic consumption of raw materials and on countries’ material footprint, which measures the global material extraction needed to feed a country’s domestic final demand. It compares these results with the trade effect on CO2 emissions. The study finds some support for the so called “Pollution Haven Hypothesis” in materials, driven by relocation of materials with industrial usage away from higher income countries. These effects are only visible for domestic production measures of the environmental indicators, and not for countries’ footprint measures. Higher income countries outsource the material-intense part of their production but do not reduce their actual consumption of raw materials. These effects are small in magnitude but statistically significant, indicating that the effect could increase if the regulatory wedge between countries increases. The trade-induced income effects are, however, dominated by a comparative advantage effect, according to which production tend to locate where it is most efficient. As a result, capital-intense economies experience the highest increases in domestic consumption of materials and emissions as well as in their global footprint of raw materials and CO2 after a trade liberalization episode. Since capital-rich economies usually post higher per-capita income, our results also suggest that higher income countries increase their total usage of materials and emissions more when opening up for trade than do lower income countries.

We asses the dynamics of the relationship between trade and circular economy outcomes; both in the EU and globally. We focus specifically on developing countries and highlight the dependence of the EU on marterial-intense imports from countries outside the block.
Acces report