The Impact of Climate Policy on Oil and Gas Investment: Evidence from Firm-Level Data

Christian Bogmans, Andrea Pescatori and Ervin Prifti

No 2023/140, IMF Working Papers from International Monetary Fund

Abstract: Using a text-based firm-level measure of climate policy exposure, we show that climate policies have led to a global decline of 6.5 percent in investment among publicly traded oil and gas companies between 2015 and 2019, with European companies experiencing the most significant impact. Similarly, climate policy uncertainty has also had a negative impact. Results support the Neoclassical investment model, which predicts a pre-emptive cut in investment in reaction to downward shifts in prospective demand, in contrast with the “green paradox” that predicts an increase in current investment to shift production toward the present.

Keywords: Fossil fuel phase out; Paris Agreement; energy transition; DiD; climate policy uncertainty; gas investment; investment model; climate policy exposure; gas firm; Climate policy; Oil sector; Climate change; Oil prices; Carbon tax; Global (search for similar items in EconPapers)
Pages: 46
Date: 2023-06-30
New Economics Papers: this item is included in nep-ene and nep-env
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