International Financial Spillovers of Carbon Price Shocks

This paper investigates the degree to which carbon price shocks in the European Union result in financial spillovers to US firms.Next, using a local projections panel regression framework for a sample of approximately 3500 US firms between 2008-2020, we document that, in response to a decrease in a firm's environmental score, their sales and investment become more sensitive to carbon price shocks in the EU, and brown firms benefit from increased demand when EU carbon prices rise.., using a local projections panel regression framework for a sample of approximately 3500 US firms between 2008-2020., we document that., in response to a decrease in a firm's environmental score., their sales and investment become more sensitive to carbon price shocks in the EU., and brown firms benefit from increased demand when EU carbon prices rise.