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Do climate policies incentivize firms to commit to setting a GHG emissions target?

Author

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  • Marco A. Hernandez Vega
  • Eduardo Martínez González

Abstract

Since the 2016 Paris Agreement, countries and companies have been increasingly pressured to adopt appropriate response measures to climate change. However, it is not clear what factors drive firms to undertake climate change actions. Using a correlated random effects panel probit model, this paper contributes to the literature by analyzing the influence of advances in climate policies, as measured by the Climate Change Performance Index, on firms committing to set a greenhouse gas (GHG) emissions target. We find that advances in national climate policies are associated with a higher probability of firms committing, particularly for firms in the non-financial sectors and, among them, for those that do not belong to sectors considered as the largest producers of greenhouse gas (GHG) emissions. Lastly, the availability of funding for green projects, indirectly measured by the issuance of green bonds per country, also positively contributes to the probability of firms committing.

Suggested Citation

  • Marco A. Hernandez Vega & Eduardo Martínez González, 2025. "Do climate policies incentivize firms to commit to setting a GHG emissions target?," Working Papers 2025-08, Banco de México.
    • Handle: RePEc:bdm:wpaper:2025-08
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    Keywords

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    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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