Lobbying and Green Transition in Fossil Fuel Sector

This study explores the impact of the lobbying activities of oil and gas companies on their green transitions, specifically their efforts to reduce fossil fuel investment and increase green innovations and abatement investment. Using a sample of listed oil and gas companies in the United States from 2000 to 2019, we find that, compared to non‐lobbying firms, lobbying companies experience a 5.8% increase in capital expenditures and a 24.7% growth rate in oil and gas reserves in the year following lobbying efforts; conversely, they do not allocate significant resources to abatement activities or green innovations. The results remain robust when an instrumental variable approach is applied to address endogeneity concerns, indicating that lobbying delays the green transition in the fossil fuel sector. Further analysis reveals that corporate lobbying is positively associated with the subsequent financial performance of fossil fuel companies, but results in increased pollution emissions and heightened environmental concerns. Lastly, we demonstrate that the Paris Agreement moderates the impact of political lobbying on delaying the green transition. These findings highlight the need for policymakers to consider the implications of corporate lobbying on the fossil fuel green transition.