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Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange

Gans, Will ; Hintermann, Beat

In: Environmental and Resource Economics, 2013, vol. 55, no. 2, p. 291-308

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    Titre
    • Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange
    Auteur
    • Gans, Will. NERA Economic Consulting, 1255 23rd St. NW, 20037-1125, Washington, DC, USA
    • Hintermann, Beat. Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, 4002, Basel, Switzerland
    Type de document
    • Postprint
    Langue
    • Anglais
    Publié dans
    • Environmental and Resource Economics, 2013, vol. 55, no. 2, p. 291-308. Springer Netherlands
    Autre version électronique
    Identifiant OAI-PMH
    • oai:doc.rero.ch:319041
    Summary
    Are private voluntary environmental actions by firms a sign of mismanagement, or a profitable "win-win” replacement for regulation? Empirical evidence is decidedly mixed. In this study, we use 19 years of monthly stock price returns, from 1991 to 2009, to examine the profitability of participation in CCX, a large voluntary greenhouse gas mitigation program. After controlling for systemic market risk as well as industry-specific shocks, we find statistically significant and positive excess returns for firms that announce their decision to join CCX. In addition, the progress of proposed greenhouse gas legislation (the Waxman-Markey bill) had a positive and large impact on excess returns for CCX member firms, suggesting that a major incentive for firms to join CCX may be to prepare for future regulation. Marginal abatement costs (proxied by the carbon price), on the other hand, were unrelated to excess returns. Our results imply that voluntary approaches should play a role in combating climate change, but that relying on them alone is not enough