Do carbon prices affect stock prices?
File(s)
Author(s)
Bolton, Patrick
Lam, Adrian
Muuls, Mirabelle
Type
Journal Article
Abstract
We explore how carbon pricing affects corporate financial performance during Phase 3 of the European Union Emissions Trading Scheme (EU ETS). We find that the relationship between carbon prices and stock prices depends critically on the proportion of verified emissions covered by freely allocated ETS allowances: For firms with a greater shortfall in emissions allowances (a greater permit coverage), an increase in daily carbon prices is associated with a decrease (increase) in contemporaneous stock prices. We provide additional evidence that firms with a significant permit shortfall reduce verified emissions in the EU, with no apparent carbon-leakage.
Date Issued
2026-06-01
Date Acceptance
2025-05-02
Citation
Journal of Financial Research, 2026, 49 (2), pp.631-665
ISSN
0270-2592
Publisher
Wiley
Start Page
631
End Page
665
Journal / Book Title
Journal of Financial Research
Volume
49
Issue
2
Copyright Statement
© 2025 The Author(s). The Journal of Financial Research published by Wiley Periodicals LLC on behalf of The Southern Finance Association and the Southwestern Finance Association. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
License URL
Identifier
10.1111/jfir.12472
Subjects
G12
G30
Q54
Q58
Publication Status
Published
Date Publish Online
2025-06-09