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Carbon Premium around the World

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  • Kacperczyk, Marcin
  • Bolton, Patrick

Abstract

This paper explores how the carbon premium varies around the world. We estimate the stock return premium associated with carbon emissions at the firm level in a cross-section of over 14,400 firms in 77 countries. We find that there is a widespread carbon premium—higher stock returns for companies with higher carbon emissions—in all sectors over three continents, Asia, Europe, and North America. Stock returns are affected by both direct and indirect emissions through the supply chain. In addition, the carbon premium has been rising in recent years. We also find widespread divestment based on carbon emissions by institutional investors around the world, but institutional investors tend to focus their divestment on foreign companies.

Suggested Citation

  • Kacperczyk, Marcin & Bolton, Patrick, 2020. "Carbon Premium around the World," CEPR Discussion Papers 14567, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:14567
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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