Stock Market Reaction to Product-Level Carbon Estimates

Abstract

We leverage the sudden introduction of salient flight-level carbon estimates provided by Google Flights. Using an event-study research design, we document an initial market reaction, with airline market values declining by around 2% following the release of the granular information. The decrease in market value is more pronounced for airlines with older fleets and is muted for airlines in China where Google Flights is not available. We interpret these findings as evidence that the equity market responds to changes in expected demand once consumers receive context-specific information about their carbon footprint. From a policy perspective, our findings indicate that the relevant level of information disaggregation differs among stakeholders. Further, they suggest that presenting information within a decision-making context to consumers is important for investors to price consumers' expected preferences.

Keywords: Carbon Emission Estimates, Information Intermediary, Event Study

JEL Classification: D83, G14, L15, Q5