Journal of International Economics · 2026 · Jakob Feveile Adolfsen、Malte Heissel、Ana-Simona Manu、Francesca Vinci
Abstract
We investigate the impact of expectations about future climate policy on investment decisions of fossil fuel firms. Our empirical analysis reveals that within the fossil fuel industry, firms with high exposure to climate policy significantly increased their investment in response to the Paris Agreement relative to firms with low exposure. Importantly, the result is driven by traditional investment in fossil fuel exploration and extraction with no indications that firms invested in a transition towards renewable energy production, nor in reducing the carbon-intensity of fossil fuel production. Our findings contribute to the ongoing discussion about the potential adverse effects of delaying the implementation of planned climate regulation.