Abstract
Setting greenhouse gas emission target is a critical step to meet the challenge of climate change. While the debate on global and national carbon emission targets has dominated every major climate change conference, little is known about how the firms set emission targets. Using a dataset on S&P 500 companies in the United States, we investigate the determinants of firm-level climate change mitigation targets, including target adoption and target metric (intensity target vs. absolute target). We find that companies with larger size, higher growth, better innovation, weaker capital constraint, and higher government pressure are more likely to establish emission targets. Further, firm growth has a negative (positive) and significant association with the use of absolute (intensity) target. This may be due to the fact that intensity target can better accommodate growth than absolute target. Policymakers and corporate managers may resort to those determinant factors in designing climate change policies to induce desirable firm-level target-setting behaviors.
Highlights
Climate change has been recognized as one of the greatest challenges for human society, as evidenced by the 2015 United Nations Climate Change Conference in Paris (COP21) and other preceding climate change summits
Using a dataset on S&P 500 companies in the United States, we investigate the determinants of firm-level climate change mitigation targets, including target adoption and target metric
We find that companies with larger size, higher growth, better innovation, weaker capital constraint, and higher government pressure are more likely to establish emission targets
Summary
Climate change has been recognized as one of the greatest challenges for human society, as evidenced by the 2015 United Nations Climate Change Conference in Paris (COP21) and other preceding climate change summits. In order to keep the average global temperature increase to no more than 2°C above pre-industrial levels, we have to limit the emissions of greenhouse gas (GHG). A critical step of coping with GHG emissions is to set appropriate emission targets. One of the earliest efforts to limit GHG emissions with binding targets is the 1997 Kyoto Protocol, which sets targets for industrialized countries with the aim to reduce GHG emissions by an average of 5.2% below the 1990 levels by 2012. A great amount of theoretical and empirical studies has been conducted to investigate the problems associated with setting country-level and region-level GHG emission targets (Philibert & Pershing, 2001; Pizer, 2006; Lutsey & Sperling, 2008)
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