The impact of climate policy on oil and gas investment: Evidence from firm-level data

Using a text-based firm-level measure of climate policy exposure, we show that climate policies have led to a global decline of 6.5 percent in investment among publicly traded oil and gas companies between 2015 and 2019, with European companies experiencing the most significant impact. Similarly, climate policy uncertainty has also had a negative impact. Our empirical results support the Neoclassical investment model. According to this model, firms pre-emptively cut investment in response to downward shifts in future demand. These findings contrast with the Green Paradox theory, which predicts an increase in current investment by oil and gas firms aimed at shifting extraction toward the present.