The Carbon Footprint of Multinational Production

Where companies choose to produce goods around the world affects the climate impacts of production since different countries have different production technologies that impact the amount pollution emitted during production. This innovative research will use four projects to study how the activity of multinational firms that produce across different countries, (multinational production (MP) for short), affects global carbon dioxide (CO2) emissions. The research develops new theoretical and empirical methods to study interactions of MP and the environment. The project also investigates the importance of institutions in driving observed global patterns of emissions and how accounting for MP changes how researchers study international trade and international trade policy. In addition to theoretical modelling, the project also involves assembling a large data set on MP, firm ownership, and CO2 emissions that will be used by other researchers. The results of this research will help guide and improve global climate negotiations that have set goals of resource transfers from rich to poor countries to address climate change. The results will not only guide policies to help improve the health of citizens across the globe but also help to establish the US as the global leader in climate policy research. In addition, the project will develop teaching materials and mentor and train graduate students, undergraduate students, and junior faculty, in MP, trade, and CO2 emissions.

The proposed research will study how multinational production (MP) activities of multinational firms affect aggregate global carbon dioxide (CO2) emissions. The research consists of four parts. The first project uses microdata on global firms to analyze the relationship between MP and CO2 emissions. The data for this part is built from Orbis and merged with firm ownership data. This project will also use aggregate data to study how host countries (countries where production takes place) differ in their CO2 emissions as well as how a firm's home country affects its CO2 emissions. The second project will develop a general equilibrium multi-country model of MP, trade, and climate change that introduces realistic features to standard MP analysis, such as tradable energy goods and energy resources, energy technology blueprints, and a spatial separation of MP, production, and sales. The third project will estimate parameters of the model using the large micro-level data set constructed in the first project. The final project will use the estimated model to study how MP and policy changes affect global CO2 emissions. The results of this research project will provide major inputs into policies to increase the adoption of "green technology" in production and reduce CO2 emissions, and thus improve citizens' health. The results will not only guide policies to help improve the health of citizens across the globe but also help to establish the US as the global leader in climate policy research.