Consequences of legislation-based reshoring for EU carbon emissions in global value chains

Abstract

The increased vulnerability of global value chains (GVCs) to events such as pandemics and wars has put reshoring trends—i.e., returning some previously delocalised activities back to the home country or nearby regions and like-minded countries—in the spotlight. The GVC reconfiguration resulting from potential backshoring, nearshoring or friendshoring processes may have crucial consequences for the fight against climate change that need to be assessed. Using an environmentally extended multiregional input‒output model, combined with the source-shifting technique and international trade data, we evaluate the impact of reshoring five strategic products according to the European Union (EU) industrial policy orientation on the EU carbon footprint. In all the simulated scenarios, there is a net saving in the EU’s carbon footprint, which depends on the sector considered. For example, the highest emission reductions are achieved in the case of iron and steel. In relative terms, reshoring scenarios allows for diversification and a reduction in the transitional climate change risks of the sectors involved. We find synergies between resilience and climate change goals and show how supplier selection through GVCs helps firms to achieve evidence-based mitigation goals.