Heterogeneous Impacts of Environmental Regulation
, Joint Program in Financial Economics PhD Student
As governments regulate greenhouse gas (GHG) emissions in an effort to combat climate change, corporations have been forced to change their production processes in order to comply. In this paper, I aim to understand how, when faced with a new state-level GHG emissions regulation, firms weigh the decision to adapt, shrink or move. I plan to quantify the relative prevalence of these three options by first examining the industry-wide changes in quantity and location of output and emissions following the introduction of new state-level regulations. In addition to the direct effect of environmental regulations, I would like to understand the longer-term financial impacts of these regulations on e.g. profitability, market share, cost of capital. Looking only at aggregate effects may mask substantial heterogeneity across firms, so I would like to use matched facility-firm data to understand this variation. Of particular interest is the difference between firms that were “green” prior the regulation and those that were “brown."