Abstract
Should the economic recovery from the 2019 novel coronavirus disease (COVID-19) be green? The current crisis is so severe that we should not take the answer for granted. It requires serious thought and we start by reviewing some arguments for and against a green approach. A crucial element is of course to see how different industries fare in the current crisis. Our empirical contribution is to examine daily stock returns for firms from the STOXX Europe 600 index. We find that firms with higher carbon intensities experienced significantly large decreases in stock values particularly those within the crude petroleum extraction, air transport and coke and refined petroleum industries. Our tentative conclusion is that efforts to revitalize the economy should avoid subsidizing stranded assets and instead target the industries of the future. However, identifying these will not necessarily be easy. We find, for example, that having an official ESG “climate change policy” has no effect on firm performance during the pandemic. We suggest possible ways of designing a new form of more informative index.
Highlights
The 2019 novel coronavirus disease (COVID-19) crisis is such a major event that in many countries debate and criticism of authorities has been muted
We focus on a sample of European firms since the EU has made significant progress on policies aimed at reducing greenhouse gas (GHG) emissions
The variable Carbon Intensity is represented by GHG emissions normalized by the firm’s market capitalization on the day before the event window
Summary
The 2019 novel coronavirus disease (COVID-19) crisis is such a major event that in many countries debate and criticism of authorities has been muted People stand behind their political leaders irrespective of their party affiliations and even independently it seems of. Pollution levels have fallen drastically for conventional pollutants like soot and NOx and the pandemic is on track to trigger the largest ever annual drop in global C O2 emissions This drop for carbon is nowhere near the declines for local pollutants, but just in line with what would be required every year to reach the goals in the Paris Agreement. Atmospheric carbon dioxide measured at the Mauna Loa Observatory just recorded 417.1 parts per million for May 2020, the highest monthly reading ever recorded (NOAA and Scripps 2020) This suggests quite strongly that we do not want to address climate change with reductions in economic output as our main instrument.
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