February 20, 2015


Science and the Stock Market: Investors’ Recognition of Unburnable Carbon


1:40 p.m. – 3:00 p.m.


1605 Tilia, Room 1103, West Village


NOTE: This seminar will be webcast but no recording will be posted for later viewing.

This paper documents the stock market’s reaction to a 2009 paper in the Nature journal of science, which concluded that only a fraction of the world’s existing oil, gas, and coal reserves could be emitted if global warming by 2050 were not to exceed 2oC above pre-industrial levels. This Nature article is now one of the most cited environmental science studies in recent years. Our analysis indicates that this publication prompted an average stock price drop of 1.5% to 2% for our sample of the 63 largest U.S. oil and gas firms. Later, in 2012–2013, the press “discovered” this article, writing hundreds of stories on the grim consequences of unburnable carbon for fossil fuel companies. We show only a small negative reaction to these later stories, mostly in the two weeks following their publication. This limited market response contrasts with the predictions of some analysts and commentators of a substantial decline in the shareholder value of fossil fuel firms from a carbon bubble. Our paper discusses possible reasons for this discrepancy.

Biographical Sketch

Paul Griffin is professor of management and associate dean at the Graduate School of Management, University of California, Davis. Prior to Davis, he served as assistant professor at the Graduate School of Business, Stanford University. He has published over 60 articles in leading accounting and finance journals, four research monographs for the Financial Accounting Standards Board, and two case books on US corporate financial reporting. His research has had a substantial impact on the profession. According to a study of influential articles, he is one of a small group whose articles are now “classics” in the field. His recent publications focus on the effects on firm value of environmental and social information, including disclosures about conflict minerals, climate change risk, and greenhouse gas emissions. Professor Griffin recently began a three-year term as co-editor of Accounting Horizons. Professor Griffin is frequently quoted in the media on topics relating to his expertise.


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