Outsourcing Climate Change
60 Pages Posted: 13 Jan 2021 Last revised: 28 Jan 2022
Date Written: January 7, 2021
This paper examines whether and how firms combat climate change. Our study provides robust evidence that firms outsource part of their carbon emissions to foreign suppliers and shows how internal and external stakeholders significantly shape firms' environmental policies. Furthermore, firms tend to seek a foreign supplier and decrease their emission abatement efforts as pressure to reduce domestic emissions intensifies. These firms are also less incentivized to develop green technologies. Finally, we find that outsourcing emissions has real and economic consequences, with investors demanding a higher carbon premium for their exposures to carbon risks associated with increased outsourced emissions.
Keywords: Outsourcing Emissions, Imports, Stakeholders, Reputational Risk, Green Technologies, Carbon Premium
JEL Classification: G23, G30, G34, M14
Suggested Citation: Suggested Citation