How does Competition Affect Firms' Carbon Performance? Firm-Level Evidence from Tariff Cuts

Manuel C. Kathan, Raphaela Roeder, Sebastian Utz and Martin Nerlinger
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Manuel C. Kathan: University of Augsburg
Raphaela Roeder: University of Augsburg
Sebastian Utz: University of Augsburg
Martin Nerlinger: University of St. Gallen - School of Finance; Swiss Finance Institute

No 25-88, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine how changes in competition affect firms’ carbon performance. Exploiting reductions in import tariffs as a quasi-natural experiment that increases competitive pressure, we find that stronger competition improves firms’ carbon efficiency through lower Scope 1 and 2 emission intensities. These results remain robust to alternative specifications, heterogeneous treatment effects, and placebo tests. Mechanism analyses indicate systematic differences in firms’ strategic responses. High-emission firms tend to adopt visible environmental actions and reallocate resources toward intangible assets, whereas low-emission firms increase investment and financing activities. Overall, our results highlight competition as a determinant of corporate decarbonization, suggesting that market forces can complement regulatory approaches to improving firms’ environmental performance.

Keywords: Carbon Emissions; Environmental Performance; Sustainability; Competition; Import Tariffs; Quasi-Natural Experiment (search for similar items in EconPapers)
Pages: 64 pages
Date: 2025-10
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-eur, nep-exp and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2588

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