The Leibniz Institute SAFE organizes a brown bag seminar:
Climate conscious investors, carbon disclosures, and efficiency
Vedant Agarwal, CEMFI
Abstract: In a world with climate conscious investors (or taxes based on perceived carbon emissions) and disclosure costs, the least carbon-intensive firms opt for disclosure and are financed according to their "true" carbon intensity, while the pool of non-disclosing firms are treated according to a common "estimated" average carbon intensity. Increasing investors' consciousness and interventions encouraging disclosures have nuanced effects. They reduce investment and emissions by non-disclosing firms, but may increase investment and emissions by newly disclosing firms. Even under efficient Pigouvian carbon taxes, disclosure is excessive (like in the product quality disclosure setup of Jovanovic, 1982). We discuss variations of the baseline setup in which these results are qualified. Our analysis suggests the need to carefully assess policies regarding climate disclosures, without unconditionally assimilating them to a substitute for carbon taxation.
