Voluntary corporate environmental initiatives and shareholder wealth

Researchers debate whether environmental investments reduce firm value or actually improve financial performance. We provide some compelling evidence on shareholder wealth effects of membership in voluntary environmental programs (VEPs). Companies announcing membership in EPA's Climate Leaders, a program targeting reductions in greenhouse gas emissions, experience significantly negative abnormal stock returns. The price decline is larger in firms with poor corporate governance structures, and for high market-to-book (i.e., high growth) firms. However, firms joining Ceres, a program involving more general environmental commitments, have insignificant announcement returns, as do portfolios of industry rivals. Overall, corporate commitments to reduce greenhouse gas emissions appear to conflict with firm value maximization. This has important implications for policies that rely on voluntary initiatives to address climate change. Further, we find that firms facing climate-related shareholder resolutions or firms with weak corporate governance standards – giving managers the discretion to make such voluntary environmentally responsible investment decisions – are more likely to join Climate Leaders; decisions that may result in lower firm value.     

Voluntary corporate environmental initiatives and shareholder wealth

Researchers debate whether environmental investments reduce firm value or actually improve financial performance. We provide some compelling evidence on shareholder wealth effects of membership in voluntary environmental programs (VEPs). Companies announcing membership in EPA's Climate Leaders, a program targeting reductions in greenhouse gas emissions, experience significantly negative abnormal stock returns. The price decline is larger in firms with poor corporate governance structures, and for high market-to-book (i.e., high growth) firms. However, firms joining Ceres, a program involving more general environmental commitments, have insignificant announcement returns, as do portfolios of industry rivals. Overall, corporate commitments to reduce greenhouse gas emissions appear to conflict with firm value maximization. This has important implications for policies that rely on voluntary initiatives to address climate change. Further, we find that firms facing climate-related shareholder resolutions or firms with weak corporate governance standards – giving managers the discretion to make such voluntary environmentally responsible investment decisions – are more likely to join Climate Leaders; decisions that may result in lower firm value.     

Firms' and states’ responses to laxer environmental standards

On June 1, 2017, President Trump announced the United States' withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environmental standards affects the behavior of profit-maximizing firms. It finds that a relaxation of emission standards (i) may increase firms’ incentives to adopt clean technologies, but not to pollute less; (ii) may negatively affect industry profitability if it is perceived as temporary; and, when this is the case, (iii) the unilateral adoption of stricter standards by large states may increase the expected profitability of every firm.     

Good news for environmental self-regulation? Finding the right link

We investigate the stock market response to firm disclosure of positive environmental information and the link from that information to environmental outcomes. We classify environmental media releases by informational content and value relevance, and assess the abnormal stock returns of each type of event. While announcements of future environmental activities lead to the largest favorable stock market reactions, there is no guaranteed link from this type of information to environmental outcomes. Further analysis of the abnormal returns shows that the magnitude of the stock market reaction depends on firm financial characteristics across all event types rather than on firm environmental performance. Our results indicate that the ability for voluntary environmental information disclosure to induce environmental self-regulation is limited to the extent that firms are able to follow through with their announcements of planned environmental activities.     

Why telecoupling research needs to account for environmental justice

ABSTRACT

Engaging with normative questions in land system science is a key challenge. This debate paper highlights the potential of incorporating elements of environmental justice scholarship into the evolving telecoupling framework that focuses on distant interactions in land systems. We first expose the reasons why environmental justice matters in understanding telecoupled systems, and the relevant approaches suited to mainstream environmental justice into telecoupled contexts. We then explore which specific elements of environmental justice need to be incorporated into telecoupling research. We focus on 1) the distribution of social-ecological burdens and benefits across distances, 2) power and justice issues in governing distantly tied systems, and 3) recognition issues in information flows, framings and discourses across distances. We conclude our paper highlighting key mechanisms to address injustices in telecoupled land systems.     

Justice in sustainability indicators and indexes

At least since the Brundtland Report, technical assessments of what can be sustained and values about what is desirable to sustain, for whom, and for how long have been intertwined. This intersection is particularly evident in the assumption that justice among people living today and between present and future generations is a key part of sustainability. In official international policy documents and academic studies of sustainability, this justice may include the equitable distribution of environmental benefits and burdens, distributive justice, or the ability of people to meaningfully contribute to decisions that affect their lives, participatory justice. Yet, the process of developing indicators and indexes to track movement toward or away from sustainability has been dominated by technical, economic, and environmental assessments. This raises questions about whether or not indexes align with and thus will monitor and encourage progress toward sustainability in a technically possible and desirable way. To begin to answer this question, this paper identifies definitions of justice used in sustainability discourse and evaluates the degree to which sustainability indicators and indexes align with these concepts. The 2010 Environmental Performance Index, Eurostat's Sustainable Development Indicators, and a group of local indicators and indexes are examined. It is found that the indicators embody various aspects of justice, though they are still significantly limited by the available data, especially as they generally cannot monitor inequities between subpopulations and have a limited capacity to monitor progress toward participatory justice.     

The environmental effects of trade within and across sectors

This paper presents a model that combines within and across sector channels through which trade affects our environment by embedding heterogeneous firms and fixed costs into a two-sector framework with an endogenous response to environmental policy. In contrast to existing literature that tends to examine these channels separately, the combined framework developed here shows how cross-sector comparative advantage and within-sector responses to trade and environmental policy or factor endowments interact to affect our environment through three channels: changes in output, cross-sector market share, and emissions intensity. In contrast to a single-sector model with neutral productivity, consideration of two sectors allows for trade liberalization to affect the allocation of inputs in each sector and thereby affect total pollution output. The additional consideration of heterogeneous firm responses to falling trade costs will generate endogenous increases in productivity that increase output, reduce aggregate emissions intensity, and moderate the cross-sector resource adjustment, relative to a representative-firm model. Simulation results show how the combined framework can replicate existing empirical outcomes, and provide concise ceteris paribus insights regarding the potential role of trade and environmental policy changes and factor expansion in driving observed outcomes and their contribution to each of the three channels.     

Cross-Hauling of Polluting Factors

This paper analyzes the investment/environment overlap using a two stage model of two jurisdictions. Capital exports are modeled as choice variables for capital owners who weigh income considerations against the effects of capital exports on the quality of their local environments and on environmental policy. This framework reveals that capital owners have an incentive to cross-haul polluting factors across jurisdictions when direct controls are used to regulate emissions and that this cross-hauling induces policymakers to ratchet up environmental policies in both locations. The importance of instrument type and commitment on environmental policy is also analyzed.     

Investment in cleaner technology and signaling distortions in a market with green consumers

I analyze the pricing and investment behavior of a firm that signals the environmental attributes of its production technology through its price to uninformed environmentally conscious consumers. I then analyze the effect of change in environmental regulation on the signaling outcome and the firm's ex ante incentive to invest in cleaner technology. When regulation is weak, a firm signals cleaner technology through higher price; in this case, the firm earns lower profit when it has cleaner technology and thus, has no incentive to invest in cleaner technology. The price charged by the clean firm declines sharply beyond a critical level of regulation. When regulation is sufficiently stringent, the firm with cleaner technology charges lower price but earns higher signaling profit, and ex ante the firm has positive incentive to invest in cleaner technology. With weak regulation, the incentive of the firm to directly disclose its environmental performance rather than signal it through price is increasing in the level of regulation; the opposite holds when regulation is sufficiently stringent.     

Investment in cleaner technology and signaling distortions in a market with green consumers

I analyze the pricing and investment behavior of a firm that signals the environmental attributes of its production technology through its price to uninformed environmentally conscious consumers. I then analyze the effect of change in environmental regulation on the signaling outcome and the firm's ex ante incentive to invest in cleaner technology. When regulation is weak, a firm signals cleaner technology through higher price; in this case, the firm earns lower profit when it has cleaner technology and thus, has no incentive to invest in cleaner technology. The price charged by the clean firm declines sharply beyond a critical level of regulation. When regulation is sufficiently stringent, the firm with cleaner technology charges lower price but earns higher signaling profit, and ex ante the firm has positive incentive to invest in cleaner technology. With weak regulation, the incentive of the firm to directly disclose its environmental performance rather than signal it through price is increasing in the level of regulation; the opposite holds when regulation is sufficiently stringent.     

Review of challenges and strategies for balanced urban–rural environmental protection in China

With the rise of environmentalism in China, great efforts have been devoted to environmental protection over the past several decades. Compared with urban environmental protection, rural environmental protection has not been attached enough importance in China due to the dual-track structure of socio-economic development. As a result, rural China is shouldering disproportionally heavy environmental burdens partly because of the differences and biases between urban and rural environmental protection seen in environmental policies, environmental rights and interests, environmental protection investment, and the environmental protection awareness of people. To eliminate the gap between rural and urban environmental protection, and achieve the goal of “balanced urban–rural environmental protection” (BUREP), government should consider mapping out proper policies and strategies. In this paper we put forward an innovative strategy of BUREP against the background of China’s urban-rural environmental protection. First, we review the current status of rural environmental protection status and its challenges compared with urban environmental protection in China. Secondly, we analyzed the main driving factors and reasons deeply, and then we put forward the BUREP strategy base on the unequal status between urban and rural environment. Finally, we proposed the framework of BUREP. This study may serve as a scientific reference regarding decision-making in coordinating urban and rural environmental protection and in constructing the new countryside of China.     

Cost-effective environmental policy: implications of induced technological change

Cost-effective environmental policy generally requires that all emission sources are faced with the same tax. In this paper I discuss how the existence of induced technological change may alter this result, if at least some of the effect is external to the firm. Focusing on Learning by doing (LBD) effects in abatement activities, it is shown that emission sources with external learning effects should be faced with a higher tax than emission sources with only autonomous technological change. By using simple numerical simulations, it is further investigated to what degree a cost-effective climate policy differs from a free quota market, under various assumptions about learning effects, diffusion of technology and environmental targets. The results indicate that optimal taxes may be significantly higher in the industrial world than in the developing world. Moreover, the industrial world's share of global abatement may be much higher in a cost-effective solution than in a free quota market. The global cost savings of a fully flexible implementation of the Kyoto Protocol are further questioned, as potential spillover effects of technological growth in the industrial world are not internalised in the market.     

剧烈人类活动区经济发展与环境污染水平关系--以广东省东莞市为例

近年来,经济发展与环境污染之间的关系成了社会经济发展的热点问题。本研究选取东莞市1990-2010年经济与环境数据,探究环境库兹涅茨曲线演替轨迹,得出研究时段内东莞市环境库兹涅茨曲线大体呈“倒U型”特征,其中“倒U型”峰值大约出现在2007年人均GDP为4.51万元时;工业废水、工业废气以及工业废渣排放量3项指标的环境库兹涅茨曲线,分别呈现弱的“倒U型”、“倒U型上升阶段”、“倒U型＋倒U型上升阶段”特征。结果表明,东莞市环境库兹涅茨曲线特征与污染物排放量、产业结构、环保政策及投资等有较为密切的关系。结论建议：东莞市可以通过调整产业结构、加大环境保护投资力度等措施促进经济转型,加速“倒U型”曲线后半段的形成。     

关于环境管理方式的几点思考

我国利用经济手段、行政手段治理环境污染存在一定局限 ,从而使各项环保措施难以收到理想效果。文章针对几种环境管理方式的局限性 ,指出开展环境保护工作不能“一刀切” ,也不能对国外流行的方式照搬照抄 ,而是要脚踏实地 ,从现实入手进行环境管理。最后对几种新环境管理方式给予了评价。     

Government green procurement spillovers: Evidence from municipal building policies in California

We study how government green procurement policies influence private-sector demand for similar products. Specifically, we measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the US Green Building Council?s Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and investments in green building expertise by local suppliers. These findings suggest that government procurement policies can accelerate the diffusion of new environmental standards that require coordinated complementary investments by various types of private adopter.     

Making a case for the consideration of trust,justice, and power in conservation relationships

In conservation, trust and justice are increasingly recognized as both intrinsically valuable and critical for successful socioecological outcomes. However, the interdependence between these concepts has not been explored. The conservation trust literature provides examples of efforts to build trust between conservationists and local actors; yet, these interventions are often conceived to incentivize local cooperation within dominant paradigms. We argue that when trust building is promoted as a technical fix that does not plan in advance to address power asymmetries in conservation practice, inequities may inadvertently be re-embedded. Therefore, we conceptualized a framework that joins trust, justice, and power so that critical analyses of conservation partnerships can be more effectively undertaken. We drew on environmental justice theory to better calibrate the trust literature for the historical-political settings of conservation, especially in the Global South. Justice and trust share strong theoretical links where perceptions of justice shape a willingness to trust, and, equally, trust is a precondition for justice to be perceived. Different forms of trust connect to varied domains of justice and power in different ways, which mediates the outcomes of interventions. We applied our framework to case studies to explore how these interdependences play out in practice. Failure of agencies to attend to issues of maldistribution, misrecognition of cultural values and knowledge, and exclusion from participation strongly compromised trust. Moreover, the ways in which nature-dependent communities and marginalized conservation workers are trusted, or the conditions under which they give trust, can lead to partnerships being perceived as just or unjust. Focusing on trust and justice can help identify power dynamics so they can be addressed more readily and create space for alternative understandings of partnerships.     

Environmental policy and human capital inequality: A matter of life and death

This paper analyzes the economic implications of an environmental policy when we account for the life expectancy of heterogeneous agents. In a framework in which everyone suffers from pollution but health status also depends on individual human capital, we find that the economy may be stuck in a trap in which inequality rises steadily, especially when the initial pollution intensity of production is too high. We emphasize that such inequality is in the long run costly for the economy in terms of health and growth. Therefore, we study whether a tax on pollution associated with an investment in pollution abatement can be used to address this situation. We show that a stricter environmental policy may allow the economy to escape from the inequality trap while enhancing the long-term growth rate when the initial inequality in human capital is not too large.     

Personality and economic choices

There is substantial variation in individual preferences for public goods, yet much of that variation remains poorly understood. However, simple measures of personality can help to explain economic values and choices in a systematic way. In this paper, we examine the effects of personality on individual economic choices over public environmental goods. Based on three datasets from three separate stated preference studies, we use a hybrid choice econometric framework to examine the effects of personality on preferences for the status quo, changes in environmental quality, and costs of investing in environmental improvements. We find effects that are consistent across all datasets. Personality, a stable feature of an individual's character that is simple to measure, enriches explanations of why the demand for environmental goods varies across people, provides an indication of how different people are likely to react to the introduction of environmental policies, and explains substantial differences in Willingness to Pay.     

Heterogeneous firms and the environment: a cap-and-trade program

Currently, cap-and-trade programs are a cornerstone of many countries' climate change policies and proposals. This paper investigates the economic and environmental effects of different climate change policy designs in a general equilibrium setting with heterogeneous firms and monopolistic competition. The analysis predicts that the cap on emissions perfectly defines the environmental quality but has no effect on firms' profits, or decisions to enter or exit the market. In contrast, increasing the share of free allocations of emission allowances, as opposed to auctions, has no effect on environmental quality but reallocates resources among firms toward the most productive ones which has an impact on firms' entry and exit decisions, the mass of firms, and the composition of the market. Firm heterogeneity magnifies these economic effects of changes in the initial allocation of allowances. The paper provides a decomposition of the change in aggregate emissions which takes account of the changes at sector level, across the firms within a sector, and at the firm level.     

Non-cooperative and cooperative climate policies with anticipated breakthrough technology

Global warming can be curbed by pricing carbon emissions and thus substituting fossil fuel with renewable energy consumption. Breakthrough technologies (e.g., fusion energy) can reduce the cost of such policies. However, the chance of such a technology coming to market depends on investment. We model breakthroughs as an irreversible tipping point in a multi-country world, with different degrees of international cooperation. We show that international spill-over effects of R&D in carbon-free technologies lead to double free-riding, strategic over-pollution and underinvestment in green R&D, thus making climate change mitigation more difficult. We also show how the demand structure determines whether carbon pricing and R&D policies are substitutes or complements.