Free DP Download 05 December 2019 - FIRMS’ EXPECTATIONS ABOUT CLIMATE REGULATION STRONGLY INFLUENCE THEIR EFFORTS TO REDUCE CARBON EMISSIONS

Thursday, December 5, 2019

FIRMS’ EXPECTATIONS ABOUT CLIMATE REGULATION STRONGLY INFLUENCE THEIR EFFORTS TO REDUCE CARBON EMISSIONS
Tarun Ramadorai, Federica Zeni        
CEPR DP No. 14155 | 29 November 2019

Firms' carbon abatement actions depend greatly on their beliefs about climate regulation. What’s more, both informational frictions and reputational concerns can amplify responses to climate regulation, increasing its effectiveness.

These are among the conclusions of a new CEPR study by Tarun Ramadorai and Federica Zai, who use data from the Carbon Disclosure project to measure firms' beliefs about climate regulation, their plans for future abatement, and their current actions on mitigating carbon emissions. Among the findings: 

  • In the five years prior to the Paris announcement, firms’ actions on carbon abatement and their beliefs about climate regulation both gradually reduced.
  • But firms’ actions and beliefs both adjusted sharply around the announcement of the Paris climate change agreement in 2016, with the size of these responses depending on whether or not firms pre-announce plans for carbon emissions reduction

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