Global Pricing of Carbon-Transition Risk

Patrick Bolton and Marcin Kacperczyk

No 28510, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Companies are exposed to carbon-transition risk as the global economy transitions away from fossil fuels to renewable energy. We estimate the market-based premium associated with this transition risk at the firm level in a cross-section of over 14,400 firms in 77 countries. We find a widespread carbon premium—higher stock returns for companies with higher levels of carbon emissions (and higher annual changes)—in all sectors over three continents, Asia, Europe, and North America. Short-term transition risk is greater for firms located in countries with lower economic development, greater reliance on fossil energy, and less inclusive political systems. Long-term transition risk is higher in countries with stricter domestic, but not international, climate policies. However, transition risk cannot be explained by greater exposure to physical (or headline) risk. Yet, raising investor awareness about climate change amplifies the level of transition risk.

JEL-codes: G12 Q51 Q54 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Note: AP
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Published as PATRICK BOLTON & MARCIN KACPERCZYK, 2023. "Global Pricing of Carbon‐Transition Risk," The Journal of Finance, vol 78(6), pages 3677-3754.

Downloads: (external link)
http://www.nber.org/papers/w28510.pdf (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:nbr:nberwo:28510

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28510

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().