Video: WIFO Research Seminar by Laurent Millischer
On 22 February 2023, Laurent Millischer from the Joint Vienna Institute spoke at a WIFO Research Seminar about the search
of stock-market incentives for decarbonization. WIFO Senior Economist Thomas Url commented on the lecture afterwards.
WIFO Research Seminar, Österreichisches Institut für Wirtschaftsforschung, Wien, 22.02.2023 12:30, https://tinyurl.com/4jp5pru9
Comment: Thomas Url – This lecture will take place at WIFO. However, you can also participate via MS Teams, see link above.
Organised by: Austrian Institute of Economic Research
Online since: 13.01.2022 0:00
Financial markets can support the transition to a low-carbon economy by redirecting funds from highly emissive to clean investments.
We study whether European stock markets incorporate carbon prices in company valuations and to what degree they discriminate
between firms with different carbon intensities. Using a novel dataset of stock prices and carbon intensities of 338 European
publicly traded companies between 2013 and 2021, we find a strongly statistically significant relationship between weekly
carbon price changes and stock returns. Crucially, this relationship depends on firms' carbon intensity: the higher the carbon
costs a firm faces, the poorer its stock performance during the periods of carbon price increases. Emissions that firms cover
with free allowances however do not impact this relationship, illustrating how both carbon pricing and disclosures are needed
for financial markets to foster climate change mitigation. The relationship we identify can provide an incentive for firms
to decarbonise. We argue in favour of more ambitious carbon pricing policies, as this would strengthen the stock-market incentive
channel while causing only limited financial stability risk for stocks.