Political connections and carbon footprint: A cross-country evidence

Abstract

Drawing from a 60 cross-country dataset, this study examined the association between political connections and carbon footprint. Based on carbon emissions and carbon intensity measures, a positive and highly significant association between political connected (PCON) firms and carbon footprint was documented. The study also found that the carbon footprint results were largely driven by direct carbon emissions, while the effect of political connections was stronger for state owned enterprise (SOE). The baseline findings were found to be robust to endogeneity test. Further tests revealed that higher carbon footprint emitted from PCON firms was more pronounced in advanced economies, and in carbon-intensive industries. However, the study found that stronger institutional governance could partially alleviate the significant and positive association between PCON firms and carbon footprint.