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Carbon Transition Risk, Emissions Trading Schemes, and Firm Performance: International Evidence

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  • Van Thi Thuy Vu
  • Khanh Hoang
  • Toan Luu Duc Huynh

Abstract

This study investigates the impact of carbon transition risk and emissions trading schemes (ETSs) on the firm performance using a sample of 401,692 firm‐quarter observations from 64 countries and territories during the 2010–2019 period. Using the Paris Agreement 2015 as the quasi‐natural experiment, our difference‐in‐differences analysis provides robust evidence of carbon transition risk enhancing heavy polluter firms' performance in countries that implemented ETS, but it is not the case for their counterparts. Our findings suggest the importance of ETS implementation in the sustainable development and demonstrate strong heterogeneity in the impact of carbon transition risk on corporate outcomes.

Suggested Citation

  • Van Thi Thuy Vu & Khanh Hoang & Toan Luu Duc Huynh, 2025. "Carbon Transition Risk, Emissions Trading Schemes, and Firm Performance: International Evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 1297-1314, March.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:2:p:1297-1314
    DOI: 10.1002/mde.4434
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