Emissions, Carbon Disclosure, and the US EXIM Bank

• In Event: Transparency in Climate Politics: Evidence from China, Europe, and the US

Abstract

Governments around the world experience rising pressures to decarbonize their economies. Regulating carbon-intensive industry is, however, rarely easy politically. As governments fear the effects of relocation, policymakers face a trade-off between giving in to public demands for stricter regulation and protecting firms' competitiveness in global markets. We argue that governments, which are constrained either institutionally or by public opinion to create regulatory relief, will resort to alternative compensatory policy for regulated firms. Here, we show that the United States Export-Import (EXIM) bank, which was established to support U.S. firms abroad, can serve such a role. Empirically, we find a robust correlation among the largest U.S. Fortune 500 firms between EXIM bank loans and firms’ voluntary emissions reporting behavior. These results are consistent with our interpretation that firms use carbon emissions disclosure as a costly information revelation mechanism to credibly signal their vulnerability to carbon regulation to governments.

Authors

• Patrick Bayer, University of Glasgow

• Jonas Bunte, Vienna University of Economics and Business