Climate regulation and emissions abatement: theory and evidence from firms’ disclosures
File(s)
Accepted version
Author(s)
Ramadorai, Tarun
Zeni, Federica
Type
Journal Article
Abstract
We measure firms’ beliefs about climate regulation, plans for future abatement, and current emissions mitigation from responses to the Carbon Disclosure Project. These measures vary strikingly around the Paris announcement. A dynamic model of a representative firm facing a future carbon levy, trading off abatement and capital growth, and facing convex adjustment costs cannot fit the data. A two-firm model with crossfirm reputational externalities, heterogeneous beliefs over climate regulation, and leader-follower interactions does. Out of sample, the model predicts firms’ reactions when the United States exits the Paris agreement. Firms’ beliefs about climate regulation strongly affect abatement, and crossfirm interactions amplify regulatory impacts.
Date Issued
2024-12-01
Date Acceptance
2023-07-11
Citation
Management Science, 2024, 70 (12), pp.8366-8385
ISSN
0025-1909
Publisher
Institute for Operations Research and Management Sciences
Start Page
8366
End Page
8385
Journal / Book Title
Management Science
Volume
70
Issue
12
Copyright Statement
Copyright © 2024, INFORMS
Publication Status
Published
Date Publish Online
2024-02-21