The environmental-financial performance nexus of EU ETS firms: A quantile regression approach

Andrea Flori, Simone Borghesi and Giovanni Marin

Energy Economics, 2024, vol. 131, issue C

Abstract: Cap-and-trade schemes are particularly attractive climate mitigation policies as they promote investment in low-carbon technologies while allowing firms to minimise their compliance costs. This can generate a positive relationship between firms’ environmental and financial performance. However, firms with limited financial resources can find cap-and-trade schemes difficult to manage, leading to their under-participation in the allowances market. This paper examines how participation in the EU ETS (measured by network centrality measures) may affect the relationship between environmental and financial performance. A panel quantile regression analysis is performed to account for possible heterogeneous behaviours at different quantiles of the financial performance distribution. The results suggest that lower emission intensity is associated with higher financial performance, and that the higher the firm’s network centrality in selling allowances, the stronger this association is. Moreover, the positive relationship between environmental and financial performance is stronger and clearer at the bottom of the financial performance distribution, thus confirming the importance of accounting for heterogeneous behaviours at different quantiles of the distribution.

Keywords: EU-ETS; Network analysis; Panel quantile regression; Financial performance; Environmental performance (search for similar items in EconPapers)
JEL-codes: D22 D40 F18 Q54 Q56 Q58 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:131:y:2024:i:c:s0140988324000367

DOI: 10.1016/j.eneco.2024.107328

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