Blame the Foreigners? Exports and Sulfur Dioxide Emissions in China

This paper provides an overhaul of the contribution of exports to industrial sulfur dioxide (SO ₂) emissions in Chinese cities. My estimation strategy exploits the import demand shocks of export destination markets (net of their demand for Chinese products) as a plausibly exogenous source of variation in the cities’ exports. The baseline results show that a 10%-point increase in export shock (weighted by the exporting industry’s relative emission intensity) leads to a 1.6%-point rise in SO ₂ emissions, equivalent to a 635-ton increase per year for an average Chinese city. This estimate remains qualitatively stable to an array of robustness checks by accounting for: alternative controls for production for domestic sales shocks, the city market share in global trade, and the influence of a lagged impact of foreign demand shocks. Tentative evidence also suggests that production for exports does not contribute to nationwide emission intensity drop. A further anatomy shows with weak evidence that foreign-owned firms and deeper contractual links with the global production network could play a positive role in reducing the environmental footprint of industrial activities.