If global warming is to stay below 2°C, there are four risks of assets stranding. First, substantial fossil fuel reserves will be stranded at the end of the fossil era. Second, this will be true for exploration capital too. Third, unanticipated changes in present or expected future climate...

This paper proposes a forward-looking metric of transition risk that relates financial performance and incremental carbon costs at the firm level. To this end, we use a consistent dividend discount framework augmented with emission costs of firms and climate scenario projections from four...

This paper investigates the impact of the yearly announcement of realized emissions on the European carbon permit market. We find that this event generally leads to significant absolute abnormal returns on the event day, which are accompanied by increased trading volumes and high intraday...

We study whether climate risk will affect the stock returns of fossil fuel companies in international markets. Our results show that in the world market, a 1% increase in climate risk will increase the stock returns of fossil fuel companies by 85 BP to 121 BP. We also prove that this climate...

We explore how carbon pricing affects corporate financial performance. Our setting exploits time series changes in European carbon allowance prices and cross-sectional heterogeneity in carbon emissions during Phase 3 of the European Union Emissions Trading Scheme (EU ETS). We find that the...