Outsourcing, trade, technology, and greenhouse gas emissions

U.S. output has steadily outpaced the rise in greenhouse gas (GHG) emissions over the past several decades. The decoupling of these two trends represents a decline in aggregate GHG emission intensity. Using recently released national datasets covering industry-specific GHG emissions and shipments, this paper decomposes the relative importance of changes in various channels underlying changes in aggregate GHG emissions in the U.S. from 1997 to 2015: scale or national output growth, cross-sector composition changes, and a technique effect capturing other factors lowering emission intensities within the country’s productive industries. The results demonstrate that reductions in within-sector techniques explain two-thirds, and cross-sector shifting of economic activity towards cleaner industries explains one-third of the increasing gap. Using data on industry exports and imports, this paper further investigates the relative environmental effect of trade on GHG emissions. Together, increased exporting, and importing, of both intermediate and final goods, has corresponded to a relatively small expansion of cleaner sectors and appears to have contributed slightly to the relative expansion of cleaner U.S. industries. In 2015, U.S. imports of intermediate and final goods account for the displacement of roughly 290 million metric tons of U.S. GHG emissions, representing less than 5% of U.S. GHG emissions in the same year.