Exploitation of natural resources and carbon transfer in trade

Abstract This paper examines the impact of natural resource exploitation, a determinant of embodied carbon that remains underexplored beyond single-country contexts, on carbon transfer in international trade, using a structural gravity model estimated with the Pseudo-Poisson Maximum Likelihood High Dimension Fixed Effects (PPMLHDFE) estimator and embodied carbon data from the Enriched Open-Source Multi-Region Input-Output Database (EORA), covering 106 exporting and 114 importing countries over the period 1999–2021. The results show that natural resource exploitation significantly increases embodied carbon in exported goods, underscoring its role as a key driver of carbon transfer in international trade. This effect varies depending on the natural resource type and the income level of countries, with stronger impacts in middle- and high-income economies compared to low-income economies. This work contributes to the literature by providing a more direct and comprehensive empirical analysis of how natural resource exploitation shapes embodied carbon in international trade, and by offering policy-relevant evidence on carbon reduction strategies while supporting economic development and the energy transition.