Estimating the Effectiveness of Internal Carbon Pricing: Evidence from Companies and Higher Education Organizations

Facing the pressure from different stakeholders (i.e. investors, customers and non-government organizations, NGOs) to manage climate-related risks, a rising number of private companies started to disclose their greenhouse gas (GHG) emissions and use internal carbon pricing (ICP) to internalize the externality to adjust business strategies from the short-term and long-term perspectives. Recent studies shed light on the guidance, the motives and barriers to implementing ICP, and the case studies of ICP adoption in companies or higher education organizations. However, the studies examining the effectiveness of ICP are still limited and the impact mechanism of ICP on the decision-making process remains unclear. Moreover, there is a lack of scientific research examining different ICP methods across different types of organizations. This study intends to bridge the research gap of the effectiveness of ICP by exploring the heterogeneous impact of different types of ICP methods on different types of organizations, such as companies in different industries and higher education organizations. The propensity score matching (PSM) will first be used to obtain a matched sample of the companies or higher education organizations with an almost identical probability of using ICP. Then, the staggered difference-in-difference (DID) will be employed to estimate the impact of adopting ICP. The comparison analysis will be employed for different types of ICP methods and different types of organizations by constructing sub-sample regressions. The findings of this research will support the decision-making process for the selection of ICP methods and provide target references for different types of organizations to maximize the benefits of ICP.