Emerging climate laws and firm-level emissions
Abstract
National laws and policies are the most important means to address the global climate emergency.
Global stocks of national climate change protecting laws increased from 72 in 1997 to 2803 as of
August 2022. Global greenhouse gases (GHG) emissions, however, continued to grow in last
decades, with significant bounce-back in post-COVID years.
There is a gap in the literature in understanding the effects of emerging climate laws on firm-level
emissions.
In this seminar, we provide global evidence by using flow of 808 mitigation laws for 55 countries over
last two decades and 20,763 firm -year observations.
Our results indicate significant effects of climate mitigation laws on reducing firm-level emissions,
however, the behavior is heterogenous across firms. High pollution and large firms respond to
mitigation laws at a much higher rate than the low polluting and small firms.
Our findings are robust to different controls, such as R&D intensity, financial leverage and return of
asset (ROA) of firms. Moreover, this study provides comprehensive global evidence on the role of
emerging climate laws on emissions reduction at firm level.
JEL Codes: Q58, Q54, D22, D62
Keywords: climate change legislation, firm-level emissions, cross-country.