Carbon Returns Across the Globe

Fisher College of Business Working Paper No. 2022-03-006

Charles A. Dice Center Working Paper No. 2022-06

63 Pages Posted: 28 Jul 2022 Last revised: 10 May 2023

Multiple version iconThere are 3 versions of this paper

Date Written: September 26, 2022


Carbon-intensive firms have been underperforming in the U.S. despite their higher carbon-transition risk. The brown-minus-green return spread, or carbon return, is zero on average globally but varies significantly across countries with unexpected climate taste shifts and earnings news. The lower carbon return in developed markets reflects stronger growth in climate concerns instead of a lower expected carbon return. After controlling for in-sample climate-concern and earnings shocks, I find the expected carbon return increases with country-level exposure to climate change and climate policy tightness. The inference differs from previous studies because I relate stock returns to lagged carbon measures.

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

JEL Classification: G10, G12, G15

Suggested Citation

Zhang, Shaojun, Carbon Returns Across the Globe (September 26, 2022). Fisher College of Business Working Paper No. 2022-03-006, Charles A. Dice Center Working Paper No. 2022-06, 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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