Carbon Premium : Is It There?

The carbon premium refers to the excess return associated with brown firms and is the focus of several recent influential studies. This paper finds negative excess return associated with carbon intensities but no excess return associated with total carbon emissions and emission growth in the U.S. Internationally, the carbon excess return is zero on average and is lower in countries with stronger climate taste shocks during the transition, such as sustainable flows and climate concerns. The inference differs from previous studies because I relate stock returns to lagged carbon measures available to investors instead of contemporaneous ones