Do Markets Trump Politics? Fossil Fuel Market Reactions to the Paris Agreement and the US Election

Samson Mukanjari and Thomas Sterner
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Thomas Sterner: Resources for the Future

No 18-24, RFF Working Paper Series from Resources for the Future

Abstract: How can event studies in financial markets best be used to evaluate policy? We take the example of climate policy and the issue of whether world climate policy is effective. Environmentalists claim too little is done. Industry argues policy is too interventionist and warns that stranding significant assets could lead to financial instability. We evaluate the impact of global climate policymaking by studying the impact of the election of President Trump and of the Paris climate agreement on the stock market value of energy sector firms. Using event study and impulse-indicator saturation methods, we show that both events had only moderate effects on the value of fossil fuel firms.

Date: 2018-10-18
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