Combating climate change through organisational innovation: an empirical analysis of internal emission trading schemes

Purpose – This paper aims to identify under which circumstances company internal emission trading schemes (IETS) are applied and to examine their actual effects on corporate greenhouse-gas (GHG) emissions. Design/methodology/approach – Using contingency theory, factors are identified that influence corporate decisions to introduce an IETS. To examine the effects of IETSs, emissions data for a sample of large German companies is used for linear regression modelling. Findings – The paper finds that today, IETSs are mainly applied by companies with high levels of emissions that are subject to external trading schemes. The current use of IETSs seems to be primarily driven by the interest to reduce emissions cost-efficiently. Testing the effects of IETSs reveals that they are able to reduce corporate GHG emissions significantly. Research limitations/implications – The effects of IETSs are only tested for companies subject to an external emission trading scheme. Furthermore, the analysis does not distinguish between different types of IETSs. Future research should address the issue of whether the reductions observed also hold true for companies not subject to external trading schemes and should formulate recommendations on how IETSs should be designed. Practical implications – The paper informs practitioners about the potential benefits of IETSs. Originality/value – For the first time, the effects of IETSs are tested for companies subject to an external emission trading scheme. The analysis suggests that a new academic debate on IETSs is needed as the introduction of external emission trading schemes has not rendered IETSs redundant.