Date & time
Climate change mitigation requires transitioning from a high- to a low-carbon economy. Over the last three decades, this transition has been far from linear, with periods of progress and setbacks. While climate policies have been the object of careful policy evaluation, firms and investors may need to react more often to climate policy uncertainty than actual climate policy. We develop a new index of climate policy uncertainty, covering the United States with monthly-level variation between 1990 and 2019. We analyze the relationship between climate policy uncertainty and firm-level outcomes such as stock returns, share price volatility, investments in research and development as well as patenting, capital expenditures, and employment for all publicly listed firms in the country. We find that climate policy uncertainty tends to considerably affect these outcomes, and often more so than existing indices of economic policy uncertainty. The direction of the uncertainty matters as well, as measured by sub-indices capturing whether the uncertainty reflects potential acceleration or deceleration in climate policymaking.