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Fighting Climate Change with Disclosure? The Real Effects of Mandatory Greenhouse Gas Emission Disclosure

Author

Listed:
  • Benedikt Downar
  • Jürgen Ernstberger
  • Hannes Rettenbacher
  • Sebastian Schwenen
  • Aleksandar Zaklan

Abstract

We examine whether mandatory disclosure of greenhouse gas (GHG) emissions influences companies’ GHG emission levels. We identify the disclosure effect by exploiting a mandate requiring UK-incorporated listed companies to disclose information on GHG emissions in their annual reports. Using a difference-in-differences design, we show that disclosing GHG emissions in annual reports reduces emission levels by about 18% over three years. We find that emission reductions primarily occur for first-time mandatory reporters compared to firms who already voluntarily reported GHG information prior to the mandate. Further, we find that the emission reductions are permanent rather than transitory and we obtain stronger results for firms with larger savings potentials. Our effects are robust to various sample specifications, i.e., analysis at the installation- and firm-level, alternative control groups, and propensity score matching.

Suggested Citation

  • Benedikt Downar & Jürgen Ernstberger & Hannes Rettenbacher & Sebastian Schwenen & Aleksandar Zaklan, 2019. "Fighting Climate Change with Disclosure? The Real Effects of Mandatory Greenhouse Gas Emission Disclosure," Discussion Papers of DIW Berlin 1795, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1795
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    References listed on IDEAS

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    Cited by:

    1. Abdifatah Ahmed Haji & Paul Coram & Indrit Troshani, 2021. "Effects of integrating CSR information in financial reports on investors’ firm value estimates," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3605-3647, June.
    2. Virginia Câmpeanu, 2021. "Comments Regarding the Book How To Avoid A Climate Disaster," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 9(1), pages 210-219, June.
    3. Ali Meftah Gerged & Lane Matthews & Mohamed Elheddad, 2021. "Mandatory disclosure, greenhouse gas emissions and the cost of equity capital: UK evidence of a U‐shaped relationship," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 908-930, February.
    4. Franziska Schütze & Jan Stede, 2020. "EU Sustainable Finance Taxonomy – What Is Its Role on the Road towards Climate Neutrality?," Discussion Papers of DIW Berlin 1923, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    Disclosure of non-financial information; greenhouse gas emissions; real effects;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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