Confronting Climate Risk With Lobbying: Evidence From the Fossil Fuel Industry

Abstract

For the years 2009-2018, we find that fossil fuel firms are more likely to lobby and that lobbying expenditures are greater with increases in a firm’s vulnerability to climate change news risk. The industry’s resistance to a timely low-carbon transition has spawned a divestment movement that took off in 2014. Estimates of fossil fuel firm vulnerability to climate change news risk increase after 2013, strengthening firms’ inclination to lobby just when this activity becomes less valued by shareholders. We consider the financial implications of continued climate policy obstruction for financial system stability and the success of the clean energy transition.

Keywords: climate risk, climate policy, financial stability, fossil fuels, lobbying

JEL Classification: D22, D72, G10, G32, Q54