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

Marco A. Hernandez Vega and Eduardo Martínez González

No 2025-08, Working Papers from Banco de México

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.

Keywords: Binary response models; Climate policy; GHG emissions (search for similar items in EconPapers)
JEL-codes: C35 G38 M14 (search for similar items in EconPapers)
Date: 2025-06
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