This paper exploits newly available information on firms' direct (own production) and indirect (supplier-generated) carbon emission intensities and transaction-level imports to conduct an indepth holistic analysis of whether and how U.S. firms address climate change. We find robust evidence that U.S. firms' imports amplify the substitutional relationship between their direct and indirect carbon emissions, suggesting that these firms outsource part of their pollution to suppliers overseas. Our key evidence is further substantiated by quasi-natural experiments associated with exogenous shocks to U.S. firms' propensity to outsource carbon emissions. We also show that firms, management, and directors with desires to maintain high environmental standings and environmentally-conscious customers and investors play a role in corporate environmental policies. Finally, firms with more imported emissions are less incentivized to develop clean technologies and have higher reputational risks and larger future stock returns.​

Keywords: Outsourcing Emissions, Imports, Stakeholders, Reputational Risk, Green Technologies

JEL classification: G23, G30, G34, M14​