Economic and political drivers of environmental impact shifting between countries

There is mounting evidence that major improvements in environmental quality in high-income countries over the past decades may have been achieved to a large degree through relocation of environmental impacts of consumption to other, usually poorer countries. While political and academic debates on appropriate policy interventions to address this challenge are gaining ground, we still know rather little about the drivers of international environmental impact shifting, other than international trade flows per se. We address this issue by focusing on the effects of economic inequality and political factors. We argue that income inequality between and within countries as well as variation in political institutions, environmental clauses in preferential trade agreements (PTAs), and participation in international environmental treaties could be important drivers or mitigators of environmental impact shifting between countries. We use novel panel data on five types of environmental impact flows between country dyads (187 countries, 1990–2015) to assess these arguments. We find that richer countries and countries with higher domestic economic equality tend to be the “outsourcers”, and poorer, domestically more unequal countries the “insourcers” of environmental impacts. Discrepancies in democracy levels aggravate the outsourcing from more equal to more unequal societies. In turn, environmental clauses in PTAs have a mitigating effect on environmental impact shifting, but participation in international environmental agreements has no such effect. Our findings highlight the need for green economy policies that reduce environmental footprints of consumption not only within high-income democracies, but also make their global supply chains more sustainable.