Tuesday, November 3, 6.00 pm, Room B217, LAPE, Université de Limoges

Carbon Pricing and Corporate Biodiversity Footprints: Environmental Co-Benefits and Resource Use Trade-Offs

Pejman Abedifar, Tehran Institute for Advanced Studies, Khatam University

Soroush Kamyab, Tehran Institute for Advanced Studies

Steven Ongena, Department of Finance at the University of Zurich

Abstract

This paper examines how carbon pricing affects corporate biodiversity footprints using firm-level panel data from 2018-2024. Because such policies target greenhouse gas emissions, their broader biodiversity effects are theoretically ambiguous: cleaner production may reduce pollution and land use pressures, while the low-carbon transition may intensify resource extraction. Exploiting Washington State’s Cap-and-Invest Program as a quasi-experimental shock, we estimate difference-in-differences effects across biodiversity-pressure categories. We find that carbon pricing reduces firms’ overall biodiversity footprints by about 16.5%, driven by reductions in pressures associated with greenhouse gas emissions, land use, air pollution, and water pollution. In contrast, resource-related pressures increase, consistent with greater material demand during the transition. These reductions in biodiversity pressures are stronger among firms with higher pre-treatment emissions intensity, but weaker among rapidly growing firms. Overall, carbon pricing generates broad environmental co-benefits but also creates resource use trade-offs.