A new study from The University of Texas at Dallas examines the differences in climate change perceptions in the United States and Europe by looking at investor behavior.
Dr. Anastasia Shcherbakova, clinical assistant professor of finance and managerial economics in the Naveen Jindal School of Management, said the researchers used the 2011 Fukushima crisis in Japan as a natural experiment to evaluate responses of U.S. and European investors to a shifting view of nuclear power.
This study, published in a recent issue of the Journal of Environmental Economics and Management, is the first to use financial investors’ actions, rather than self-reported opinions, to investigate the trans-Atlantic difference in public opinion on climate change and the environment.
Results show that investment behavior reflects investors’ environmental perceptions. The researchers observed a significant increase in returns to coal in the U.S., implying that investors put more money into coal stocks, Shcherbakova said. This suggests that they perceived cost efficiency and reliability of energy supply to be more pertinent issues than climate change.
In Europe, investors put significantly more money into renewable energy stocks, suggesting that they reflect the region’s environmentally conscious attitudes and willingness to pay for environmental outcomes, relative to investors in U.S. markets, Shcherbakova said.
“In the U.S., there is a very long history of coal,” she said. “If you want a cheap and reliable source of energy, you just run your coal plant all day long. In Europe, there’s been a significant backlash against coal. People like their countryside and are much more nature-oriented.
“In Europe, people have been much more willing to embrace renewable energy even though it’s much more expensive. In the U.S., we observe a much more price-sensitive energy consumer.”
Shcherbakova said one implication of the findings is that financial markets can be important contributors to successes and failures of government policy.
For example, if the government said that by 2025, 25 percent of the country’s energy must come from renewable resources, it would be difficult to achieve that goal if the policy isn’t aligned with the reality of economics, she said.