Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange

Why do for-profit firms take voluntary steps to improve the environment? Brand appeal to green consumers or investors, the ability to influence or avoid regulation, or the experience gained for future regulation, have all been suggested as possible reasons. The empirical evidence is decidedly mixed. This paper uses 19 years of monthly stock price returns to examine the profitability of participation in the world’s largest voluntary greenhouse gas mitigation program: the Chicago Climate Exchange. After controlling for systemic market risk as well as industry-specific shocks, we find no statistically significant impact of announcing to join CCX on excess returns. However, the market appeared to be sensitive to changes in abatement costs implied by CCX membership. Most strikingly, the progress of proposed greenhouse gas legislation (the Waxman-Markey bill) had a positive impact on excess returns for CCX member firms, suggesting that the most profitable incentive for firms to join CCX is to prepare for future regulation. Our results imply that relying on voluntary approaches alone to combat climate change may not be enough.voluntary action, firm performance, climate change, permit markets

The Role of Prices and Information in Residential Energy Consumption and Investment Behavior

Good stewardship of the planet's natural resources is the central challenge of our age, and energy generation and usage has become an important dimension of the current debate about sustainability. Americans spend approximately 5% of household income on energy, and over the last few decades--and as recently as with President Obama's stimulus package of 2009--many government policies have been targeted at residential energy efficiency. Improving energy efficiency would reduce total energy usage, emissions associated with generation of power from fossil fuels, and reliance on imports of such fuels. In this dissertation, I analyze three key aspects of residential energy behavior and their impact on policy. The first is elasticity of energy demand with respect to price. Earlier estimates span a wide range, due to the differing geographic coverage and time scales used in each study. In Chapter 3, I estimate a residential demand function for energy on a recent, nationwide panel of U.S. homes, and find higher price elasticities than previously documented. These results suggest that residential consumers are price responsive in their energy consumption. How they respond to price is the topic of Chapter 4, where I estimate a series of demand functions for energy efficiency improvements, and focus on the role of moving on energy investment. I find that households that move within 2 years are 20% less likely to invest in heaters than those who do not move, suggesting that homeowners do not believe that energy efficiency is capitalized into the value of the home. Requiring disclosure about the energy efficiency of a home during the sales process may remedy this disincentive. In Chapter 5, I use data from an original survey of households to examine how consumers value future savings from energy bills vis-à-vis money. I find that consumers apply a lower discount rate to energy savings than to money, suggesting that market failures, rather than consumer bias, may be responsible for a low rate of residential energy efficiency investment. Taken together, these findings contribute a greater understanding of residential energy behavior, and underscore the potential for intelligent policy to achieve energy efficiency goals

Smart Meter Devices and The Effect of Feedback on Residential Electricity Consumption: Evidence from a Natural Experiment in Northern Ireland

Using a unique set of data and exploiting a large-scale natural experiment, we estimate the effect of real-time usage information on residential electricity consumption in Northern Ireland. Starting in April 2002, the utility replaced prepayment meters with “smart” meters that allow the consumer to track usage in real-time. We rely on this event, account for the endogeneity of price and plan with consumption through a plan selection correction term, and find that the provision of information is associated with a decline in electricity consumption of up to 20%. We find that the reduction is robust to different specifications, selection-bias correction methods and subsamples of the original data. At £15-17 per tonne of CO2e (2009£), the smart meter program delivers cost-effective reductions in carbon dioxide emissions.Residential Energy, Electricity Demand, Feedback, Smart Meter, Information

Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income

We study residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997-2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. To our knowledge, this is the most comprehensive set of data for examining household residential energy usage at the national level, containing the broadest geographical coverage, and with the longest longitudinal component (up to 6 observations per dwelling). We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the -0.860 to -0.667 range, while the own price elasticity of gas demand is -0.693 to -0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.Residential Electricity and Gas Demand, Price Elasticity Of Energy Demand, Static Model, Dynamic Panel Data Model, Partial Adjustment Model

Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income

We study residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997-2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. To our knowledge, this is the most comprehensive set of data for examining household residential energy usage at the national level, containing the broadest geographical coverage, and with the longest longitudinal component (up to 6 observations per dwelling). We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the -0.860 to -0.667 range, while the own price elasticity of gas demand is -0.693 to -0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.residential electricity and gas demand, price elasticity of energy demand, static model, dynamic panel data model, partial adjustment model

Market effects of voluntary climate action by firms: Evidence from the Chicago Climate Exchange

Why do for-profit firms take voluntary steps to improve the environment? Brand appeal to green consumers or investors, the ability to influence or avoid regulation, or the experience gained for future regulation, have all been suggested as possible reasons. The empirical evidence is decidedly mixed. This paper uses 19 years of monthly stock price returns to examine the profitability of participation in the world's largest voluntary greenhouse gas mitigation program: the Chicago Climate Exchange. After controlling for systemic market risk as well as industry-specific shocks, we find no statistically significant impact of announcing to join CCX on excess returns. However, the market appeared to be sensitive to changes in abatement costs implied by CCX membership. Most strikingly, the progress of proposed greenhouse gas legislation (the Waxman-Markey bill) had a positive impact on excess returns for CCX member firms, suggesting that the most profitable incentive for firms to join CCX is to prepare for future regulation. Our results imply that relying on voluntary approaches alone to combat climate change may not be enough

Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange

Why do for-profit firms take voluntary steps to improve the environment? Do green actions indicate that managers are wasting resources in costly programs to produce benefit that cannot be captured by the firm? Or is voluntary environmental spending profitable for a business sense?  Empirical evidence is decidedly mixed.  In this study, we use 19 years of monthly stock price returns to examine the profitability of participation in the world’s largest voluntary greenhouse gas mitigation program: the Chicago Climate Exchange (CCX).  After controlling for systemic market risk as well as industry-specific shocks, we find statistically significantly positive excess returns for firms that announce their decision to join CCX.  In addition, the progress of proposed greenhouse gas legislation (the Waxman-Markey bill) had a positive and large impact on excess returns for CCX member firms, suggesting that a major incentive for firms to join CCX may be to prepare for future regulation.  Marginal abatement costs (proxied by the carbon price), on the other hand, were unrelated to excess returns.  Our results imply that voluntary approaches should play a role in combating climate change, but that relying on them alone is not enough

Market Effects of Voluntary Climate Action by Firms: Evidence from the Chicago Climate Exchange

Are private voluntary environmental actions by firms a sign of mismanagement, or a profitable "win-win” replacement for regulation? Empirical evidence is decidedly mixed. In this study, we use 19 years of monthly stock price returns, from 1991 to 2009, to examine the profitability of participation in CCX, a large voluntary greenhouse gas mitigation program. After controlling for systemic market risk as well as industry-specific shocks, we find statistically significant and positive excess returns for firms that announce their decision to join CCX. In addition, the progress of proposed greenhouse gas legislation (the Waxman-Markey bill) had a positive and large impact on excess returns for CCX member firms, suggesting that a major incentive for firms to join CCX may be to prepare for future regulation. Marginal abatement costs (proxied by the carbon price), on the other hand, were unrelated to excess returns. Our results imply that voluntary approaches should play a role in combating climate change, but that relying on them alone is not enoug

Individual and Public-Program Adaptation: Coping with Heat Waves in Five Cities in Canada

Heat Alert and Response Systems (HARS) are currently undergoing testing and implementation in Canada. These programs seek to reduce the adverse health effects of heat waves on human health by issuing weather forecasts and warnings, informing individuals about possible protections from excessive heat, and providing such protections to vulnerable subpopulations and individuals at risk. For these programs to be designed effectively, it is important to know how individuals perceive the heat, what their experience with heat-related illness is, how they protect themselves from excessive heat, and how they acquire information about such protections. In September 2010, we conducted a survey of households in 5 cities in Canada to study these issues. At the time of the survey, these cities had not implemented heat outreach and response systems. The study results indicate that individuals’ recollections of recent heat wave events were generally accurate. About 21% of the sample reported feeling unwell during the most recent heat spell, but these illnesses were generally minor. Only in 25 cases out of 243, these illnesses were confirmed or diagnosed by a health care professional. The rate at which our respondents reported heat-related illnesses was higher among those with cardiovascular and respiratory illnesses, was higher among younger respondents and bore no relationship with the availability of air conditioning at home. Most of the respondents indicated that they would not dismiss themselves as “not at risk” and that they would cope with excessive heat by staying in air conditioned environments and keeping well hydrated. Despite the absence of heat outreach and education programs in their city, our respondents at least a rough idea of how to take care of themselves. The presence of air conditioning and knowledge of cooling centers is location-specific, which provides opportunities for targeting HARS interventions

Metformin Associated With Lower Cancer Mortality in Type 2 Diabetes: ZODIAC-16

OBJECTIVE - Several Studies have suggested an association between specific diabetes treatment and cancer mortality. We studied the association between metformin use and cancer mortality in a prospectively followed cohort. RESEARCH DESIGN AND METHODS - in 1998 and 1999,1,353 patients With type 2 diabetes were enrolled in the Zwolle Outpatient Diabetes project Integrating Available Care 0 (ZODIAC) study in the Netherlands. Vital status was assessed in January 2009. Cancer mortality rate was evaluated using Standardized Mortality ratios (SMRs), and the association between metformin use and cancer mortality was evaluated with a Cox proportional hazards model, taking possible confounders into account. RESULTS - Median follow-up time was 9.6 years, average age at baseline was 68 years, and average A1C was 7.5%. Of the patients, 570 died, of which 122 died of malignancies. The SMR for cancer mortality was 1.47 (95% CI 1.22-1.76). In patients taking metformin compared with patients not taking metformin at baseline, the adjusted hazard ratio (HR) for cancer mortality was 0.43 (95% Cl 0.23-0.80), and the HR With every increase of I g of metformin was 0.58 (95% CI 0.36-093), CONCLUSIONS - in general, patients with type 2 diabetes are at increased risk for cancer mortality. In our group, metformin use was associated with lower cancer mortality compared with nonuse of metformin. Although the design cannot provide a conclusion about causality, our results suggest a protective effect of metformin on cancer mortality