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Real effects of climate policy : financial constraints and spillovers

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Bartram, Söhnke M., Hou, Kewei and Kim, Sung Wook (2022) Real effects of climate policy : financial constraints and spillovers. Journal of Financial Economics, 143 (2). pp. 668-696. doi:10.1016/j.jfineco.2021.06.015

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Official URL: https://doi.org/10.1016/j.jfineco.2021.06.015

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Abstract

We document that localized policies aimed at mitigating climate risk can have unintended consequences due to regulatory arbitrage by firms. Using a difference-in-differences framework to study the impact of the California cap-and-trade program with U.S. plant-level data, we show that financially constrained firms shift emissions and output from California to other states where they have similar plants that are underutilized. By contrast, unconstrained firms do not make such adjustments. Overall, unconstrained firms do not reduce their total emissions, whereas constrained firms increase their total emissions after the cap-and-trade rule, undermining the effectiveness of the policy.

Item Type: Journal Article
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
Q Science > QC Physics
Divisions: Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Climatic changes -- Economic aspects, Environmental policy -- Econometric models, Emissions trading -- California, Finance -- Environmental aspects, Environmental economics
Journal or Publication Title: Journal of Financial Economics
Publisher: Elsevier Science BV
ISSN: 0304-405X
Official Date: February 2022
Dates:
DateEvent
February 2022Published
23 June 2021Available
28 March 2021Accepted
Volume: 143
Number: 2
Page Range: pp. 668-696
DOI: 10.1016/j.jfineco.2021.06.015
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
UNSPECIFIEDOhio State University. Fisher College of Businesshttp://viaf.org/viaf/138689116
UNSPECIFIEDBritish Academy of Managementhttp://dx.doi.org/10.13039/100012682
UNSPECIFIEDLeverhulme Trusthttp://dx.doi.org/10.13039/501100000275
UNSPECIFIEDCollegio Carlo Albertohttp://dx.doi.org/10.13039/501100002903
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