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Produced by the Research Support TeamAbstractThe Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about developmentissues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry thenames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely thoseof the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank andits affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.Policy Research Working Paper11164Trade’s impact on emissions is not straightforward. Exist-ing literature on trade and emissions primarily focuses oncountries’ net export emissions, often neglecting the emis-sions saved by importing products instead of producingthem domestically. The environmental impact from tradeis influenced by the balance between emissions gener-ated from exporting goods and emissions avoided by notproducing them domestically. This paper investigates theenvironmental impacts of trade, focusing on the spatialdifferences in production emissions. Our estimates indicatethat direct emissions embodied in exports are significantand rising, accounting for 31 percent of annual greenhouseThis paper is a product of the Planet Vertical, Office of the Chief Economist and the Economic Policy Global Department.It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to developmentpolicy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at ebadi@worldbank.org and ealdazcarroll@worldbank.org. gas (GHG) emissions and 25 percent of annual particulatematter (PM2.5) emissions in 2021. However, consideringthe direct emissions saved through imports, trade results ina reduction of global GHG emissions annually by up to 2.2percent from 2004 to 2021, as it allows countries with highemission intensity to import rather than produce domes-tically. This reduction is not observed in PM2.5 emissions,where trade leads to an increase of up to 1 percent. Thesefindings highlight the discrepancy in emission intensitiesbetween exporting and importing countries, which influ-ences the impact of trade on global emissions. Trade's Emissions Paradox: Cutting Greenhouse Gases,Raising Air PollutionEbad Ebadii, Enrique Aldaz-CarrolliiiiiKeywords: International Trade; Trade and Environment; Air pollution; Greenhouse gasemissions.JEL codes: F14; F18; Q53; Q56.iThe World Bank Group.iiThe World Bank Group.iiiThe authors are grateful to Maksym Chepeliev, Farzad Taheripour, Richard Damania, Sebastien Dessus,Stephane Hallegatte, Maryla Maliszewska, Joseph Dixon Callisto Pryor, and World Bank colleagues forvaluable comments and suggestions. Funding from the Korea Green Growth Trust Fund (KGGTF) is gratefullyacknowledged. IntroductionEmissions have profound impacts on human health and well-being. Greenhouse gas (GHG)emissions contribute to climate change, a deadly force, causing heat-related deaths (Watts et al.2021; Vicedo-Cabrera 2021), flood risks (Pal et al. 2022; Zhang et al. 2021), droughts (Yuan et al.2023), and accelerating vector-borne and noncommunicable diseases (Samarasekera 2023; Haines& Ebi 2019; World Health Organization 2014). Air pollution (PM2.5) causes around 7 millionpremature deaths annually due to heart disease, stroke, lung diseases, and infections likepneumonia (World Health Organization 2023). It can cause respiratory and cardiovascular issues,increase infant mortality (Chay and Greenstone 2003), and reduce life expectancy (Greenstone andFan 2018; Pope III, Ezzati, and Dockery 2009), posing a greater threat than smoking or otherenvironmental risks (Energy Policy Institute at the University of Chicago 2024).Trade can have opposing effects on emissions. On the one hand, it can increase emissions due toincreasedproduction to cater to global markets,outsourcing to countries with weakerenvironmental regulations (Jakob and Marschinski 2013), and through international transportation(World Bank 2020). On the other hand, trade can reduce emissions by increasing efficiency,enabling countries to specialize and capitalize on their environmental comparative advantages (LeMoigne et al. 2024), promoting green technology transfer (Wang and Zhu, 2020), and knowledgespillovers (World Bank 2020).Different estimates highlight the significant emissions footprint embodied in trade. In 2001, directemissions from the production of traded goods and services were 21.5% of global emissions(Peters et al. 2008). By 2015, 25% of CO2 emissions were linked to traded goods and services(Zesar et al. 2020). Regarding PM2.5 emissions, in 2014, 20.4% of the 38,400 Gg of PM2.5emitted