How Big Oil Can Internalize Climate Change Externalities

76 Pages Posted: 30 Jan 2023

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Zhe Wang

Pennsylvania State University - Department of Finance

Date Written: January 27, 2023

Abstract

Climate change presents global externalities, leading private markets to underinvest in climate change solutions. The key insight of this paper is that some private market participants, namely large oil and gas (O&G) firms, are in a position to internalize important climate change externalities because they have substantial assets whose value critically depends on how climate change is addressed; in particular technologies that lower the marginal cost of carbon consumption will raise the value of O&G assets. We show that a more concentrated O&G industry can help private markets internalize the externalities of climate change and generate more green investment.

Suggested Citation

Gustafson, Matthew and Wang, Zhe, How Big Oil Can Internalize Climate Change Externalities (January 27, 2023). Available at SSRN: https://ssrn.com/abstract=4339763 or http://dx.doi.org/10.2139/ssrn.4339763

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Zhe Wang (Contact Author)

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

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