US Environmental Load Displacement: Examining Consumption, Regulations and the Role of NAFTA

In light of concerns that structural changes to US production may not be accompanied by similar changes to US consumption, this paper provides a detailed examination of US environmental load displacement over the period 1974-2001. The forces that drive Such displacement are also examined, with particular attention paid to the scale and composition of US consumption, the share of imports in consumption, the role of environmental regulations and the potential impact of NAFTA. It is found that the USA as a whole has experienced environmental load displacement over the period under consideration, with the extent of this displacement seeming to increase over the last decade. It would appear to be the increasing scale of US trade that is increasing environmental load displacement. Indeed, the composition of US imports and exports have become significantly cleaner over the period considered. However, although imports from Mexico have grown more rapidly than exports to Mexico, no evidence is found to suggest that NAFTA is increasing displacement to Mexico. With regard to US domestic consumption patterns, although they have become cleaner, a greater share than ever is now met via imports. Sectoral pollution abatement costs are found to be a determinant of this increasing share of imports in domestic consumption. (C) 2004 Elsevier B.V. All rights reserved.