The Impact of Climate Policy on Oil and Gas Investment: Evidence from Firm-Level Data

By Christian Bogmans, Andrea Pescatori, Ervin Prifti

June 30, 2023

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Format: Chicago

Christian Bogmans, Andrea Pescatori, and Ervin Prifti. The Impact of Climate Policy on Oil and Gas Investment: Evidence from Firm-Level Data, (USA: International Monetary Fund, 2023) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using a text-based firm-level measure of climate policy exposure, we show that climate policies have led to a global decline of 6.5 percent in investment among publicly traded oil and gas companies between 2015 and 2019, with European companies experiencing the most significant impact. Similarly, climate policy uncertainty has also had a negative impact. Results support the Neoclassical investment model, which predicts a pre-emptive cut in investment in reaction to downward shifts in prospective demand, in contrast with the “green paradox” that predicts an increase in current investment to shift production toward the present.

Subject: Carbon tax, Climate change, Climate policy, Economic sectors, Environment, Oil prices, Oil sector, Prices, Taxes

Keywords: Carbon tax, Climate change, Climate policy, Climate policy exposure, Climate policy uncertainty, DiD, Energy transition, Fossil fuel phase out, Gas firm, Gas investment, Global, Investment model, Oil prices, Oil sector, Paris Agreement

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/140
Stock No:

WPIEA2023140
ISBN:

9798400248443
ISSN:

1018-5941

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