American University
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When Green Isn't All There Is to Be: An Analysis of Voluntary Greenhouse Gas Reduction Goals

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posted on 2023-09-07, 05:07 authored by Nicholas Reksten

This dissertation explores motivations behind setting voluntary greenhouse gas (GHG) emission reduction goals. It seeks to understand how the institutional environment in which firms operate shape their profit-maximizing decisions regarding GHG emissions. Such an environment is populated by various stakeholder groups that exert influence on the firm. Understanding how such groups impact the firm can (1) inform policies that take advantage of institutional arrangements to encourage more aggressive emissions reductions by firms and (2) demonstrate the limits of voluntary approaches in reducing GHG emissions. The first essay develops a theoretical framework in which corporate social responsibility (CSR) related to climate change is modeled as the proportion of clean inputs firms use in their production processes. Stakeholder groups can have preferences for environmental CSR that impact a firm's profit function and constraints. The resulting framework demonstrates the various considerations that a firm may have in deciding on a profit-maximizing level of environmental CSR given various characteristics. The second essay delves more deeply into the decision making process within the firm as it develops a strategic response to the issue of climate change. This is done by analyzing 17 interviews conducted with experts on environmental sustainability efforts in large firms. These suggest that companies may be prompted to respond to the issue of climate change by pressure from different groups, but cost considerations shape the degree of that response. Reduction goals often encourage innovation at the firms as they examine their production process with the dual objectives of reducing costs and emissions. The third essay explores the characteristics of firms that joined the U.S. Environmental Protection Agency's Climate Leaders program, a voluntary program through which member firms set and achieved GHG emissions reductions from 2002 to 2010. A panel of the S&P 500 members from 2002, 87 of which eventually joined Climate Leaders, is analyzed using a panel probit model and survival analysis. Results suggest that firms already engaged in sustainability activities were more likely to join the program. Additionally, larger firms, those located in more environmentally friendly states, and those located in areas with cleaner air are more likely to be in the program.





Degree grantor

American University. Department of Economics

Degree level

  • Doctoral

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