Climate Litigation Reduces Corporate Emissions

• In Event: Climate Action in the Private Sector

Abstract

We consider whether climate litigation – court cases in which climate change law, policy, or science is a material issue – against publicly traded companies reduce their greenhouse gas emissions. Existing research typically examines the importance of legislative and executive institutions for reducing emissions yet neglects the judiciary’s relevance for efforts to promote climate action. Using firm-level panel data on emissions, exposure to climate litigation, and other factors, we show that suing and achieving legal victories against American and European firms over climate change reduces their emissions substantially, with the largest reductions arising after judges issue rulings against firms. We complement our quantitative analysis with process-tracing methods to identify three potential mechanisms – direct sanctions, reputation costs, and operational disruptions – for explaining why climate litigation reduces corporate emissions. Our findings have important implications for future research and policy, suggesting the existence of a previously under-examined path for climate action: the courts.

Author

• William Kakenmaster, University of Notre Dame