Carbon Footprints in a Global Marketplace : Firm-Level Insights on Trade and the Environment

This doctoral thesis consists of three independent research papers. All papers are empirical and cover the area of international trade and environmental economics, with particular focus on Swedish manufacturing firms. The first paper investigates how carbon offshoring could contribute to cleaner production. Using Swedish firm-product level data from 2005-2014, combined with instrumental variable and dynamic difference-in-difference estimation techniques, the study finds that increased imports of emission-intensive goods makes firms' production processes cleaner by 5%, but also raises transport emissions by 2%. It also highlights that offshoring through foreign direct investment (FDI) could potentially have a larger impact on reducing emissions compared to importing inputs not produced in-house.The second paper explores how import competition influences the environmental behavior of local firms in Sweden. Using detailed geographical information about the location of all manufacturing firms in Sweden, the study finds that firms facing import competition tend to become more emission efficient, with the effect diminishing as the distance between the producer and the importer increases. This emissions reduction is attributed to productivity spillovers, shifts in product mix, and investments in emissions abatement.The third paper examines the impact of energy prices on manufacturing firms by using a shift-share instrument and a dynamic difference-in-difference approaches that isolate the exogenous variation in firm-level energy prices. I find that higher energy prices, driven by increased carbon pricing, both benefit the environment by reducing emissions and have potentially harmful economics effects by lowering productivity and employment, particularly for highly skilled workers. Firms are more likely to pass on costs to consumers, worsening inflation, and the most affected are those with high energy intensity and those outside the EU Emissions Trading System (EU-ETS).