Carbon Returns Across the Globe

63 Pages Posted: 19 May 2022 Last revised: 2 Mar 2023

Multiple version iconThere are 3 versions of this paper

Date Written: November 11, 2022


More carbon-intensive firms have been underperforming in the U.S. but not globally at the first glance, despite their higher carbon-transition risk. The brown-minus-green return spread, or carbon return, disperses significantly across countries. In particular, the carbon return varies with unexpected climate concern shocks and earnings shocks and thus is lower in the more climate-concerned developed countries. After controlling for in-sample shocks, I find the carbon return varies with country-level physical risk and climate policy tightness but not most other country characteristics, including carbon dependency. The inference differs from previous studies because I relate stock returns to lagged carbon measures.

Keywords: carbon emissions, climate change, predictability, stock returns

JEL Classification: G10, G12, G15

Suggested Citation

Zhang, Shaojun, Carbon Returns Across the Globe (November 11, 2022). Available at SSRN: or

Shaojun Zhang (Contact Author)

The Ohio State University

2100 Neil Avenue
Columbus, OH 43210-1144
United States


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