Reputational impact of businesses’ compliance strategies under the EU Emissions Trading Scheme

Abstract

Since January 2005, more than 11,000 installations in the EU are participating in the CO2 Emission Trading Scheme. Within this system companies may choose from a variety of compliance strategy options. To assess the relevance of reputational effects on companies’ climate strategies, a survey of the 300 largest emitting companies in Germany was conducted. Results indicate that reputational effects matter, but are dominated by other factors such as compliance costs, technical and economic risks, or practicabilty. Long-run reputational risks are most relevant for the Clean Development Mechanism and Joint Implementation.