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Burn now or never? Climate policy exposure and investment of fossil fuel firms

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  • Adolfsen, Jakob Feveile
  • Heissel, Malte
  • Manu, Ana-Simona
  • Vinci, Francesca

Abstract

We investigate the impact of expectations about future climate policy on investment decisions of fossil fuel firms. Our empirical analysis reveals that within the fossil fuel industry, firms with high exposure to climate policy significantly increased their investment in response to the Paris Agreement relative to firms with low exposure. Importantly, the result is driven by traditional investment in fossil fuel exploration and extraction with no indications that firms invested in a transition towards renewable energy production, nor in reducing the carbon-intensity of fossil fuel production. Our findings contribute to the ongoing discussion about the potential adverse effects of delaying the implementation of planned climate regulation.

Suggested Citation

  • Adolfsen, Jakob Feveile & Heissel, Malte & Manu, Ana-Simona & Vinci, Francesca, 2026. "Burn now or never? Climate policy exposure and investment of fossil fuel firms," Journal of International Economics, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:inecon:v:162:y:2026:i:c:s0022199626000577
    DOI: 10.1016/j.jinteco.2026.104267
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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