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BIPR | Has the Paris Climate Agreement Changed Corporate Behavior?
Has the Paris Climate Agreement Changed Corporate Behavior?

November 11, 2024 - 18:30

Jeff D. Colgan, Brown University; Climate Solutions Lab

Event Recap

Professor Jeff D. Colgan's presentation examined whether the 2015 Paris Climate Agreement has influenced corporate behavior. Given the outcome of the recent U.S. election, Colgan noted that climate action faces new obstacles as U.S. leadership under the Trump administration would likely diminish global unity crucial for climate progress. Despite setbacks, however, Colgan emphasized that climate politics is a multifaceted effort – "a marathon, not a sprint".

As one aspect of this multifaceted dynamism, Colgan and his team focused their research on whether the Paris Agreement's influence has "trickled down" to the corporate level. They analyzed whether firms, significant contributors to emissions, have shifted resources toward decarbonization since the Agreement was adopted. The research centered on automotive manufacturing, an industry with traditionally high emissions and the potential to shift production towards a cleaner technology: electric vehicles (EVs). Their study included twelve leading car manufacturers, who collectively produce 80% of global automobiles. They looked exclusively at tailpipe emissions, which constitute the bulk of the sector's impact, and left aside operational emissions.

The study tested three hypotheses through which the Paris Agreement could affect corporate behavior: 1) by directly incentivizing firms, 2) by prompting national governments to implement policies that impact firms, and 3) by inspiring non-state actors to pressure firms. Data sources included earnings calls, corporate targets as well as capital expenditure (capex) and R&D spending. Findings showed that, while some firms have increasingly discussed climate change, most show little change in their rhetoric. Additionally, although all twelve automakers set EV production goals after 2016, the study found mixed evidence of real change.

Ultimately, the team found, for the first hypothesis, limited evidence of a direct, Agreement-driven shift in corporate behavior. Paris did not provide strong incentives for decarbonization, and details are still being negotiated, for instance, at the ongoing COP29 in Azerbaijan. Regarding the second hypothesis, the Agreement likely contributed to some national policies, most clearly in the EU. For the U.S. and Japan, this is not the case. For China, the study did find policy changes, however with an unclear causal connection to Paris. Moreover, while the Agreement has led to the emergence of non-state initiatives, their impact remains unclear.

Colgan acknowledged the challenges of causal inference, as there is no parallel reality in which Paris did not occur. Instead, he proposed an intermediate standard of evidence: If rapid change followed 2015, it could be attributed to the Agreement – alternative factors that could explain changes in corporate behavior, such as technological change, did not happen as rapidly in 2015.

Colgan also contrasted the Paris Agreement with the U.S. Inflation Reduction Act, which has generated more substantial corporate investments through direct incentives. Concluding, Professor Jeff Colgan suggested that while Paris has prompted rhetorical changes, it has not significantly shifted corporate behaviors. The main impact of the Agreement may lie in energizing social movements.

During the Q&A the audience raised a number of questions, including on causality, the role of developing countries in driving policy change, and whether the Paris Agreement may contribute to decarbonization in different ways.



Has the Paris Climate Agreement Changed Corporate Behavior?

hosted by Professor Nina Hall

Jeff D. Colgan
Brown University; Climate Solutions Lab

Jeff D. Colgan is the Richard Holbrooke Professor in the Department of Political Science and Watson Institute for Public and International Affairs at Brown University. He is also Director of the Climate Solutions Lab at Brown University. His research focuses on international order and security, especially as related to energy and the environment.

His triple award-winning book, Partial Hegemony: Oil Politics and International Order, draws lessons from oil history about how states and other actors create and maintain international governance arrangements (Oxford University Press, 2021). The book then applies those lessons to other problems like climate change, peacekeeping, finance, and nuclear politics. The book won the APSA Jervis-Schroeder Best Book Award in International History and Politics, the Best Book Award (co-winner) from the APSA International Collaboration section, and the Best Book (Energy Policy--Non-Fiction) award from the American Energy Society.

His previous book, Petro-Aggression: When Oil Causes War, was published in 2013 by Cambridge University Press. Colgan has published work in International Organization, Foreign Affairs, World Politics, International Security and elsewhere. He also occasionally blogs at the Monkey Cage and Foreign Affairs.

Colgan previously taught at the School of International Service of American University (2010-2014), and was a Fellow at the Woodrow Wilson International Center for Scholars in Washington DC, in 2012-13. He completed his PhD at Princeton University, and was a Canada-US Fulbright Scholar at UC Berkeley, where he earned a Master's in Public Policy. Colgan has worked with the World Bank, McKinsey & Company, and The Brattle Group.
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