Carbon Regulation and Global Supply Chains: Evidence on Firm Relationships and Emissions Spillovers

Investigator

• Muskan Chawla, Accounting and Information Systems Division

Background

Carbon pricing mechanisms such as carbon taxes and emissions trading systems are expanding globally, but regulatory approaches vary widely across jurisdictions. Firms operating in internationally fragmented supply chains may respond to unilateral regulations by adjusting sourcing patterns, terminating supplier relationships, or shifting production to less-regulated regions. These adaptations raise critical questions about whether carbon pricing reduces global emissions or inadvertently displaces them, creating carbon leakage within global value chains.

Research Objectives

This project examines how carbon regulations propagate through global supplier–customer networks and influence sourcing decisions, firm relationships, and overall emissions. It will analyze how suppliers and buyers restructure partnerships in response to regulatory exposure and assess whether these adjustments reduce or increase global carbon footprints. The findings will guide policymakers in designing carbon policies that minimize leakage while strengthening cross-border climate cooperation.