Burn now or never? Climate change exposure and investment of fossil fuel firms

Jakob Adolfsen, Malte Heissel, Ana-Simona Manu and Francesca Vinci

No 2945, Working Paper Series from European Central Bank

Abstract: We investigate the impact of expectations about future climate policy on investment decisions of fossil fuel firms. Our empirical analysis reveals that firms with greater exposure to climate change significantly increased their investment in response to the Paris Agreement, in contrast to firms with lower exposure. Importantly, investment was directed towards traditional activities in the fossil fuel industry. By contrast, there are no indications that firms invested to transition towards renewable energy sources nor in making production less carbon-intensive. Our findings contribute to the ongoing discussion about the potential adverse effects of delays in the implementation of climate regulation. JEL Classification: G31, G38, Q58

Keywords: climate change; fossil fuels; green paradox; investment; policy (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-ene and nep-env
Note: 2663204
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242945

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