The Future of Emissions

57 Pages Posted: 19 Oct 2022 Last revised: 26 Oct 2022

See all articles by Jules H. van Binsbergen

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Andreas Brøgger

Copenhagen Business School

Date Written: October 7, 2022


We argue for the introduction of firm-level emission futures contracts as a novel way of assessing the real impact of ESG initiatives. Our measure is based on the forward-looking market-based valuation of firm-level CO2 emissions. We establish both theoretically and empirically that backward-looking subjective ratings are limited to the extent that they fail to capture future reductions in emissions. We show evidence that although lower emissions have predicted higher E ratings, higher E ratings have predicted higher, not lower, emissions. As such, by following these subjective ratings, investors may have inadvertently allocated their money to firms that pollute more, not less. We discuss several applications of our new measure, including executive pay and investment management.

Keywords: Emission Futures, ESG Measurement, Externalities, Environmental, CO2 Emission Reductions, Real Impact, Green Washing, Cheap Talk, Green Misallocation, Executive Remuneration, Green Fund Management

Suggested Citation

van Binsbergen, Jules H. and Brøgger, Andreas, The Future of Emissions (October 7, 2022). Available at SSRN: or

Jules H. Van Binsbergen

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States


Andreas Brøgger (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg, Frederiksberg 2000

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