Conference Agenda

This study examines the efficacy and implications of state-level anti-Environmental, Social, and Governance (ESG) policies by investigating the impact of Texas’s anti-ESG policy on oil and gas (O&G) drilling activity through a difference-in-regression-discontinuity design comparing the Texas and New Mexico Permian. I find that the policy had no statistically significant effect on new drilling activity in the eight months after implementation; this is consistent across several robustness checks. Results are also not economically significant, other than in a few robustness checks. This suggests that banks did not respond to the policy by adapting short-term lending behavior, which is one pathway through which to signal to the regulator that the institution is not boycotting energy companies. Short-term lending has been subject to industry-wide changes in recent years and is particularly relevant to regulators seeking to protect O&G investment within state borders. This paper contributes to the nascent literature on anti-ESG policies in the United States.

Exploiting exogenous variation in retail fuel prices from a temporary fuel tax discount in Germany, we estimate how the pass-through of the discount varies over time and space. We draw on daily gasoline prices of virtually all gas stations in Germany and neighboring France, with France serving as a control, and estimate an event study model covering the full period of the discount from June to August 2022. We find average pass-through rates on the order of 96% for diesel and 86% for petrol, but with substantially lower rates in high-income regions and in regions with a low degree of competition. Our results also suggest pronounced heterogeneity over time: The magnitude of the pass-through rate dissipates sharply over the three months in which the discount was in effect, a pattern consistent with retailer responses to short-term changes in consumer attention. Taken together, our results indicate that average pass-through estimates may obscure a high degree of spatial and temporal heterogeneity that bears upon the assessment of competition and distributional effects.

We consider an economy with credit constraints, where green and carbon firms compete in the energy market. If owners of carbon-specific resources earn rents, the investment might be biased in favor of carbon firms. This bias materializes in the form of multiple (two) equilibria: an efficient one characterized by symmetric conditions for accessing the credit market; an inefficient equilibrium implying a larger market share for carbon firms, greater carbon resource rents, and better access to credit for carbon firms. If concerned investors accept a lower return to hold green-labeled financial instruments, the development of green finance can trigger a structural effect, whereby the equilibrium biased in favor of carbon firms is ruled out. This impact goes beyond the direct favorable marginal effect on the share of green energy. Our analysis clarifies the economic mechanisms at work, and identifies the conditions for distinct structural rather than marginal effects. When that is the case, the development of green finance activity might amplify the impact of climate policy fiscal instruments on investment.

Governments around the world continue to rely on price freezes of major commodities as a strategy for controlling inflation expectations. In the case of gasoline, these price freezes have also become persistent de-facto energy subsidies that can compromise progress in climate mitigation. Exploiting an unexpected announcement to end a gasoline price freeze (and align domestic with international prices) in Brazil in 2013, we study the costs, distributional impacts and political persistence of gasoline price freezes. With an event study research design that relies on both theoretical finance models as well as data-driven synthetic controls and machine learning methods to recover counterfactual expected stock returns, we find that the event day abnormal returns resulting from the plausible phase out of the price freeze range from 6.098 to 6.807 percent for nonvoting shares and 8.084 to 8.828 percent for voting shares. Although inefficient and regressive, we also show that no individual group or politician has much of an incentive to eliminate this price freeze.