Governments institute carbon pricing to curb emissions. We show increasing carbon futures prices decrease the carbon equity premium but only in brown firms. This premium is obtained from a panel regression on individual firm-level sentiment scores. The premium varies across industries and...

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...

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...