The implications of carbon abatement for industrial composition and firm value

Marginal abatement cost curves (MACCs) serve as a representation of the costs or savings associated with various actions aimed at reducing green house gas (GHG) emissions. This thesis investigates whether investors could have earned abnormal stock returns by constructing portfolios that exploit differences in MAC curves across four countries, Brazil, India, Sweden, and the United States. Using GICS industry group-specific and firm-level data, I find little evidence that investors utilizing MACC data to create long-short portfolios could have achieved abnormal returns. My evidence is consistent with minimal international stock market frictions and segmentation. Stock markets are efficient insofar as information about the differences in the costs across countries of GHG abatement technologies appear to be rapidly incorporated into stock prices.