Production-generated emissions of CO2 declined by 29% in France between 2000 and 2014 (year of latest available data, see Chart 1). This reduction was achieved despite an increase in the stock of domestic productive capital of 54%. Over the same period, the CO2 emissions of the rest of the world rose (by 40%), although to a significantly lesser degree than their capital stock at constant prices (up 78%). The fall in French domestic emissions and their increase in the rest of the world also coincided with a sharp rise – of 81% – in the share of French foreign direct investment (FDI) abroad in the stock of productive capital. This growth in FDI is one of the most striking features of the internationalization of the French economy (Cotterlaz et al., 2022).
This pattern of internationalisation in France is also reflected in a negative balance of trade in goods and a positive balance of trade in business services (Bui Quang and Gigout, 2021) and of investment income. The relocation of industrial production inevitably results in the relocation of its associated emissions.
This paper aims to quantify for the first time the contribution of French subsidiaries abroad to the CO2 emissions of the rest of the world. It reports on the basis of figures for 2014, the most recent year when sector account data were available. In the case of foreign direct investment (FDI) abroad, the French parent company has control or at least significant influence over the management of one or more foreign subsidiaries. The parent company can directly influence the production processes used, and can therefore intervene in the environmental efficiency of its subsidiaries. The aim of this exercise is thus to estimate the quantity of CO2 emitted abroad as a consequence of the decision-making capacities of French residents (see Box 1). Such an assessment has implications for both economic and environmental policy. Encouraging companies to reduce their emissions abroad as well as domestically is a driver for the reduction of emissions globally. The new disclosure obligations introduced with the entry into force of the European corporate sustainability reporting directive will allow better monitoring of foreign emissions. …