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Yves Schüler
- 18 February 2025
- WORKING PAPER SERIES - No. 3030Details
- Abstract
- Does it pay to invest in green companies? In countries where a market for carbon is functioning, such as those within the European Union, our findings suggest that it should be beneficial. Using a sample of green and brown European firms, we initially demonstrate that green companies have outperformed brown ones in recent times. Subsequently, we develop a production economy model in which brown firms acquire permits to emit carbon into the atmosphere. We find that the presence of a well-functioning carbon market could account for the green equity premium observed in our data. Incorporating a preference for green financial assets is also unlikely to overturn our results.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
Q51 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Valuation of Environmental Effects
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation - Network
- Challenges for Monetary Policy Transmission in a Changing World Network (ChaMP)