Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market

Matteo Crosignani, Emilio Osambela and Matt Pritsker

No 20531, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Are carbon emissions priced in equity markets? The literature is split with different approaches yielding conflicting results. We develop a stylized model showing that, if emissions are priced, stock returns depend on expected emissions and the product of the innovation in emissions and the price-dividend ratio. Building on this insight, we derive and test new predictions. We find that emissions are priced in equity markets, but the magnitude of such pricing is highly sensitive to the inclusion of a few “super emitters†(mostly operating in electric power generation). Our theoretical insight also helps reconcile seemingly divergent results in the literature.

Keywords: Carbon emissions; ESG (search for similar items in EconPapers)
JEL-codes: D62 G11 G12 Q54 (search for similar items in EconPapers)
Date: 2025-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20531 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20531

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20531

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().