ETC/ATNI Report 2019/7: Emissions outsourcing in the EU. A review of potential effects on industrial pollution.

This report reviews potential evidence for the outsourcing of European industrial emissions, as well as the impact of environmental regulation as a driver for industrial relocation.

This study reviews potential evidence for emissions outsourcing in the European Union as the reduction in industrial emissions in Europe may be linked to the relocation of industry abroad (i.e. away from Europe). Emission trends of selected industrial pollutants to air (PAH, SO_x, B(a)P, PCB, Pb, Zn and Ni) were established for both domestic emissions and embodied emissions in imports using available data in the EXIOBASE environmentally extended multiregional input-output system. Despite the overall decreasing trends of domestic emissions in Europe, a great variation was observed in the decrease rate of direct emissions and the  increase rates in embodied emissions, due to increasing import of associated products. In addition to the analysis of data in EXIOBASE, a review of literature shows that  industries’ responses to environmental regulations differ greatly based on the nature of industrial activities. Despite imposing higher costs to industries, no evidence was found in the reviewed literature that European environmental regulations caused industries to relocate. However, once industries aim to relocate outside of Europe to benefit from economic factors, such as lowering their production cost, the degree by which environmental regulations are enforced in the country of relocation can play a significant role in selecting their new location.