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Optimal Design of Climate Disclosure Policies: Transparency versus Externality

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  • Shangen Li

Abstract

Does a more transparent climate disclosure policy induce lower emissions? This paper examines the welfare implications of transparency in climate disclosure regulation. Increased disclosure transparency could result in a larger equilibrium externality, but never leaves the firm worse off. Consequently, mandating full disclosure is no different from maximizing the firm's private benefit while disregarding the ensuing externality. Transparency beyond binary disclosure is necessary only when the firm holds private information about its incentives for emission reduction. I provide conditions under which focusing on threshold disclosure policies entails no loss of generality.

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  • Shangen Li, 2024. "Optimal Design of Climate Disclosure Policies: Transparency versus Externality," Papers 2402.11961, arXiv.org, revised Aug 2024.
    • Handle: RePEc:arx:papers:2402.11961
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    References listed on IDEAS

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    1. Lavender Yang & Nicholas Z. Muller & Pierre Jinghong Liang, 2021. "The Real Effects of Mandatory CSR Disclosure on Emissions: Evidence from the Greenhouse Gas Reporting Program," NBER Working Papers 28984, National Bureau of Economic Research, Inc.
    2. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 183-198.
    3. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
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