Energy and pollution embodied in trade: The case of Norway

Access to resources and energy, but also policy and historical development, shape the industrial structure of countries. This implies that some countries specialize in energy-intensive and pollution-intensive products. National environmental regulation and international agreements are also expected to shape the global patterns of production, as the concern about "carbon-leakage" under the Kyoto Protocol indicates. Most empirical investigations of the energy and pollution embodied in trade have assumed that imports are produced with the same technology as exports. These investigations were able to reflect differences in the composition of imports and exports, but not differences in pollution control technology, efficiency, or energy mix. We calculate the energy and pollution embodied in trade for Norway, taking into account the energy and pollution intensity of important trading partners. Our investigations indicate that Norwegian exports are more energy intensive than imports. In contrast, due to Norways energy mix and technology, Norwegian exports are often less pollution intensive than imports. This leads us to the hypothesis that, for the case of Norway, there are environmental benefits from trade and a specialization in energy-intensive production is environmentally preferable.