Abstract
This paper explores how the carbon premium varies around the world. We estimate the stock return
premium associated with carbon emissions at the firm level in a cross-section of over 14,400 firms in 77
countries. We find that there is a widespread carbon premium—higher stock returns for companies with higher
carbon emissions—in all sectors over three continents, Asia, Europe, and North America. Stock returns are
affected by both direct and indirect emissions through the supply chain. In addition, the carbon premium has
been rising in recent years. We also find widespread divestment based on carbon emissions by institutional
investors around the world, but institutional investors tend to focus their divestment on foreign companies.