Uncertain climate regulations -- why corporations still invest

Sep 21, 2009

Firms and corporations frequently need to take investment decisions without knowing if future regulation will support or threaten their investment. This is especially true in energy intensive industries that face high uncertainty on future climate policies. For example in the electricity industry, the optimal investment choices of firms are dependent on the design of future climate regulations.

It is often thought that firms will react by adopting a "wait and see" strategy in order to stave off spending any unnecessary capital on unstable or uncertain investments. The latest research from the shows that this is not necessarily the case, and firms do not always postpone such investments until the last possible moment.

Previous research has usually explained corporate decision making with either economic or social logic. This study creates a link between the two schools of thought that is vital to understand why firms invest in spite of large regulatory uncertainties and how firms manage the challenge of reducing their carbon foot print.

The study establishes a chain of evidence how the necessity to comply with social expectations drive investments in the electricity industry. Furthermore, it uses an economic rational to show that firms that expect to reap benefits from investing before other, slower competitors, or those that recognize internal synergies with other house investments, are often more likely to react and invest sooner rather than later.

Source: Wiley (news : web)

Explore further: Best of Last Week – A less crowded universe, antibiotics altering child development and reducing rumination

Related Stories

Green firms rewarded by financial markets

May 29, 2008

When a company improves its environmental performance, it is common to think that the accompanying economic improvements are based on the company's more efficient use of resources. However,

Corporate Culture Matters For Firm Policies, Study Finds

Dec 12, 2007

Corporate culture involves more than just dress codes and the atmosphere in the office – it helps define a company's most important economic decisions, according to new research. Researchers examined corporate culture in ...

Recommended for you

Lady, you're on the money

Jul 03, 2015

So far, women whose portraits appear on U.S. money have been a party of three. Excluding commemorative currency, only Sacagawea, Susan B. Anthony and Helen Keller appear on coins in general circulation, according ...

Another five things to know about meta-analysis

Jul 01, 2015

Last year I wrote a post of "5 Key Things to Know About Meta-Analysis". It was a great way to focus – but it was hard keeping to only 5. With meta-analyses booming, including many that are poorly done or ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.