Fighting Climate Change with Disclosure? The Real Effects of Mandatory Greenhouse Gas Emission Disclosure

Discussion Papers 1795, 39 S.

Benedikt Downar, Jürgen Ernstberger, Hannes Rettenbacher, Sebastian Schwenen, Aleksandar Zaklan

2019. Newer version published as DP 1875.

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We examine whether mandatory disclosure of greenhouse gas (GHG) emissions influences companies’ GHG emission levels. We identify the disclosure effect by exploiting a mandate requiring UK-incorporated listed companies to disclose information on GHG emissions in their annual reports. Using a difference-in-differences design, we show that disclosing GHG emissions in annual reports reduces emission levels by about 18% over three years. We find that emission reductions primarily occur for first-time mandatory reporters compared to firms who already voluntarily reported GHG information prior to the mandate. Further, we find that the emission reductions are permanent rather than transitory and we obtain stronger results for firms with larger savings potentials. Our effects are robust to various sample specifications, i.e., analysis at the installation- and firm-level, alternative control groups, and propensity score matching.

Aleksandar Zaklan

Research Associate in the Energy, Transportation, Environment Department

JEL-Classification: Q28;Q40;M41;M48
Keywords: Disclosure of non-financial information; greenhouse gas emissions; real effects