Examining the nexus between exporting status and CO2 productivity in Indonesian agri-based manufacturing

Despite growing concerns over the environmental implications of international trade in emerging economies, the relationship between exporting and carbon footprint remains underexplored. Utilizing plant-level data from Indonesia from 2009 to 2015, this study contributes to the firm-level literature examining the environmental consequences of exporting. Relying on a two-step Generalized Method of Moments (GMM) approach, this study adapts a structural approach based on Richter and Schiersch (2017, CO2 Emission Intensity and Exporting: Evidence from Firm-Level Data, European Economic Review). This study finds that exporting is associated with increased CO2 productivity, i.e., sales per unit of CO2 emissions, in agri-based manufacturing. However, it uncovers heterogeneous associations across industries, sizes, locations, and ownership types. The productivity gap between exporters and non-exporters largely explains the export orientation and CO2 productivity nexus. The findings suggest three relevant policy implications: facilitating plants' entry into international markets by improving infrastructure and reducing export barriers; reconsidering incentives that favor smaller plants to prevent growth disincentives; and carefully evaluating advantages offered to foreign-owned plants, such as free trade zones, solely from a CO2 productivity perspective.