Mexico | GHG Emissions in Mexico-United States Trade

Summary

This document examines the relationship between international trade and greenhouse gas (GHG) emissions in the context of productive integration between Mexico and the United States. A key finding is that, since the early 2000s, Mexico has become a net exporter of GHG emissions to the United States.

Key points

Key points:
Combining international trade data from the Bank of Mexico (Banco de México) with OECD data on GHG emissions embodied in international trade, the analysis explores the evolution of the emissions balance associated with bilateral trade, distinguishing between total and final goods in the economic sectors most deeply integrated into Mexico-United States trade.
The results show that, since the early 2000s, Mexico has become a net exporter of emissions to the United States, particularly when total goods are considered, while remaining a net importer of emissions in its trade with the world as a whole. This pattern reflects the role of the domestic transformation of intermediate inputs and Mexico's position within North American regional value chains.
The evidence also indicates that transportation equipment and electrical-electronic equipment sectors not only account for the largest trade flows between the two countries, but also contribute disproportionately to GHG emissions, with the transportation equipment sector exhibiting the highest emissions intensity per dollar traded.
A sectoral decomposition by emissions scopes further reveals that most of the carbon footprint in these sectors is concentrated in the supply chain.
Finally, the paper concludes that economic integration between Mexico and the United States has advanced more rapidly than convergence in emissions intensity, in the absence of common climate regulatory frameworks. Paradoxically, this has translated into a comparative advantage for Mexico, a finding that is particularly relevant in the context of the ongoing review of the United States-Mexico-Canada Agreement (USMCA).