The continuing climate crisis has prompted the European Union to adopt an ambitious climate mitigation agenda under the European Green Deal. While territorial emissions in the EU have fallen markedly, such declines may partly reflect emission offshoring: stricter domestic policies can shift production abroad and replace EU output with imports, potentially increasing the consumption-based emissions embodied in imported goods. This study examines whether higher EU environmental policy stringency is associated with higher CO₂ emissions embodied in EU imports, using a consumption-based approach that assigns responsibility to EU consumers rather than producer countries.

We measure policy stringency using the OECD’s Climate Actions and Policies Measurement Framework (CAPMF), an internationally harmonised index covering core climate mitigation policies. The analysis focuses on 31 European importers (EU27, EFTA minus Liechtenstein, and the UK, collectively referred to as the “EU” for notational convenience) importing from 150 exporters over 2016-2023. Embodied CO₂ emissions in imports are calculated using multi-regional input-output data from EORA.

Building on the structural gravity model of trade, we estimate multiplicative Poisson Pseudo-Maximum Likelihood (PPML) specifications that accommodate zero flows and are robust to heteroskedasticity. The baseline model includes exporter-importer-sector and year fixed effects to account for bilateral trade costs and common shocks, consistent with multilateral resistance considerations.

Results indicate that the average association between stringency and imported embodied emissions is modest in pooled estimates. However, allowing the CAPMF effect to vary by exporter income group reveals strong heterogeneity: the relationship is positive and significant for low- and lower-middle-income exporters, insignificant for upper-middle-income exporters, and negative and significant for high-income exporters. Overall, the findings suggest a reallocation of embodied emissions in EU imports toward lower-income suppliers as EU policy stringency rises, consistent with concerns about pollution haven dynamics operating through global supply chains.

Syeda Aimen Abbas is a PhD candidate at University of Siegen and a researcher at University of Gießen for the GreenPaths Project funded by EU’s Horizon Europe research and innovation programme. Her research examines the social dimensions of ecological transition policies in Europe, contributing to the development of just transition pathways. 

Moderation: Keith Williges