Intended and Unintended Consequences of Facility-Level Mandatory CSR Disclosure: Evidence From the Greenhouse Gas Reporting Program

We study the real effects of the first nationwide mandatory CSR disclosure regulation in the U.S., the Greenhouse Gas Reporting Program (GHGRP). Starting in 2010, the Environmental Protection Agency (EPA) requires the disclosure of greenhouse gas emissions by facilities emitting more than 25,000 metric tons of CO 2 per year. We construct a novel set of emission data on power plants around the regulation to examine the causal effects of GHGRP in the utility industry. Using a difference-in-difference research design, we find that while as intended by the policy power plants that are subject to the GHGRP reduced carbon dioxide emission rates by 7%, the reduction in emission no longer holds at the firm level. Specifically, we detect evidence of strategic behavior by firms that own both GHGRP plants and non-GHGRP plants. Presumably unintended by the policy, such firms strategically reallocate emissions between plants to reduce GHGRP-disclosed emissions. This evidence suggests that the reporting program is costly to the affected firms which reacted both positively towards the policy objectives and also somewhat negatively at the same time, not as intended by the policymakers. We also provide evidence of a stronger reduction in plant emissions by publicly traded firms, which is consistent with prior literature supporting shareholder pressure as a primary channel through which mandatory Corporate Social Responsibility (CSR) reporting programs affect firm behavior.