06/05/2026 - 15:30 - Online
(KU Leuven)
will give a presentation on
Abstract
As production becomes increasingly fragmented across borders, a growing share of carbon emissions is generated upstream and embodied in intermediate inputs traded along global value chains. Yet little is known about how firm-level sourcing decisions shape these emissions or how trade policy alters them. This paper investigates how carbon emissions are embedded in firms’ buyer–supplier production networks and how tariffs reshape these networks and the emissions embodied in firms’ global value chains. Using unique production network data for US firms combined with firm-level measures of direct and value-chain emissions, I first document that more productive firms source from more productive and cleaner suppliers, and that firms cleaner in-house also operate cleaner supply chains. Exploiting the US–China trade war as a quasi-natural experiment, I then show that tariff-exposed firms significantly reorganize their supplier networks, reallocating sourcing away from Chinese suppliers toward domestic and third-country alternatives. This geographic reallocation reveals a fundamental decoupling: the new suppliers are more productive but also more emissions-intensive, simultaneously upgrading supply chain quality while worsening its environmental footprint. Guided by these findings, I develop and calibrate a model of endogenous firm-to-firm network formation with emissions, in which the within-country link between productivity and cleanliness breaks down when trade policy forces reallocation across countries with different emissions technologies. Counterfactual simulations quantify the environmental cost of tariff shocks and explore implications for trade policy as environmental policy.