Carbon Liquidity

50 Pages Posted: 11 Oct 2021 Last revised: 2 Mar 2022

See all articles by Ryan Riordan

Ryan Riordan

Queen's University - Smith School of Business

Martin Nerlinger

University of St. Gallen - School of Finance; Swiss Finance Institute

Date Written: March 1, 2022


We study the impact of disclosing greenhouse gas emissions (CO2) on the liquidity of firms’ equity. For the subset of firms that report emissions, we find that higher emissions lead to lower liquidity. However, firms that do disclose emissions have lower bid-ask spreads than firms that do not. This is because these firms are more liquid before disclosing emissions but also because when firms first disclose emissions bid-ask spreads decrease by roughly 13%. These results hold for high information asymmetry firms, for high and low carbon intensity firms, and for early and late disclosing firms. Our results are consistent with theory that shows that more information asymmetry leads to lower liquidity and suggests that intermediaries also care about the CO2 emissions of firms.

Keywords: Greenhouse gas emissions, liquidity, disclosure

JEL Classification: G12, G14, Q54

Suggested Citation

Riordan, Ryan and Nerlinger, Martin, Carbon Liquidity (March 1, 2022). Available at SSRN: or

Ryan Riordan (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6

Martin Nerlinger

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St. Gallen, 9000

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

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