Extreme weather exposure and corporate carbon emissions management: Evidence from forty countries

Abstract

Utilizing survey data for firms from 40 countries, we explore the impact of extreme weather exposure on corporate carbon emissions management. Our findings indicate that firms manage their carbon emissions better if they have suffered losses due to extreme weather events. These results persist after considering endogeneity concerns, including placebo tests, the Heckman two-stage method, propensity score matching, the instrumental variables approach, and other robustness tests. Cross-sectional analyses reveal that this impact is more pronounced for firms located in developed countries and in countries with superior climate protection and lower levels of carbon emissions. Furthermore, the effect of extreme weather exposure is more significant for firms with foreign ownership and political connections and those subject to an energy tax. Finally, improved management of carbon emissions accompanied by extreme weather exposure can lead to increased corporate capacity utilization and reduced production costs.