Carbon emissions and firm profitability

We assess the empirical relation between firm profitability and reported carbon emission intensity. Using data on S&P 500 firms, we find that the cross-sectional relation between profitability and carbon emission intensity is strongly negative: firms with high carbon emission intensity have low profitability and vice versa. This finding is statistically significant in both portfolio sorts and Fama-MacBeth regressions. It is also robust to industry effects, across subsamples, using alternative profitability measures and using estimated carbon emission intensity for a larger cross section of firms.