CS38: Corporate Decarbonization and System Resilience

Research question.
Do firms that commit to the Science Based Targets initiative (SBTi) reduce greenhouse gas emissions more than non-adopters?
Methodology.
We use a panel of 802 publicly listed firms observed from 2015 to 2023 (7,218 firm-years, 41 countries). Emissions are modelled dynamically and estimated using a two-step system GMM to account for strong persistence and the likely endogeneity of SBTi commitments. The dependent variable is log CO₂-equivalent emissions (Scope 1–2). Identification relies on internal lag instruments and standard specification tests; results are checked across alternative instrument sets and added controls.
Findings.
Emissions display substantial persistence (δ≈0.84), implying that adjustments unfold gradually. SBTi commitment is associated with a 2.7% reduction in emissions in the short run and a 16.3% reduction in the long run. The association is concentrated in energy-intensive industries (≈−4.1% short run; long-run ≈−28.5%), while estimates for less energy-intensive sectors are small and not statistically different from zero. Differences across headquarters regions are not robust once covariates are included, though European firms in energy-intensive activities show larger reductions than their non-certified peers. Placebo timing tests do not indicate pre-trends one year before approval, and results are stable when adding an environmental-consciousness proxy.
Implications.
Because the estimated reductions are concentrated in energy-intensive sectors-where abatement typically requires operational and capital changes-SBTi is a stronger signal of real decarbonization there than in less energy-intensive activities. This makes sector context central when interpreting commitments and benchmarking firms. For policymakers, the natural complement is accountability rather than mandating participation: standardized disclosure of scope coverage, base year, interim milestones, and annual progress (ideally with limited assurance) for large emitters would make voluntary commitments comparable and harder to use as low-cost signalling without measurable reductions.

Hydrogen is widely regarded as one of the long-term solutions for low-carbon transport, being used mainly in fuel cells. However, the climate emergency requires short and medium-term decarbonization of existing diesel road fleets, mainly in countries with high dependence on this mode of transport. This study investigates dual fuel hydrogen–diesel operation without major modifications to vehicles in operation as a transitional strategy within the hydrogen economy.
A heavy truck engine was adapted for hydrogen injection into the intake manifold and tested on a chassis dynamometer under three load levels and nine rotations at steady state within the engine's operating envelope. The hydrogen energy substitution fraction varied between 0% and 30%. Fuel consumption and exhaust emissions were quantified.
Under all conditions evaluated, the increase in HES resulted in a systematic reduction in CO2, confirming the direct effect of fossil carbon displacement. At most operating points, reductions in CO and NOx were also observed, although not uniformly. Hydrocarbon emissions (CH4 and THC) did not show a consistent pattern, highlighting the complexity of the phenomena of mixture formation and ignition.
The results indicate that substitution rates of up to 30% can reduce the carbon intensity of freight transport without requiring the immediate adoption of more disruptive technologies, such as fuel cell systems. From a systemic perspective, dual-fuel retrofits can contribute to the initial formation of the hydrogen market and the gradual expansion of infrastructure.

Latin America's electricity interconnections remain limited despite large system-level gains from coordinated expansion. This paper aims to ask: How much do cross-border interconnections reduce total system costs and emissions under climate-driven hydrological uncertainty, and what does the international state of practice suggest for investment remuneration and financing in the region? We address this question with a multi-period linear power system expansion model that co-optimizes generation, storage, and cross-border transmission investments and dispatch across 21 Latin American countries (2025–2050), using representative days with hourly resolution in Pyomo/Gurobi. We compare scenarios with different levels of integrations under alternative hydrological conditions, and we complement the modeling with a structured review of international interconnection governance and cost–benefit practices (e.g., ENTSO-E CBA) and Latin American institutional pathways (e.g., SIEPAC). 
Quantitatively, the model in new interconnections shows a reduction in 2045 total system costs from USD 125.8–162.0 billion (no-integration) to USD 105.9–130.1 billion (with-integration) per annum, yielding cumulative savings up to USD 31.87 billion by 2045. In addition, 2035 emissions fall from 97.3 MtCO₂ without integration to 27.1 MtCO₂ with transmission investments). Achieving these outcomes requires build-out (around 300 GW by 2045) and transmission CAPEX of roughly USD 6.61–9.59 billion (in annuitized value) by 2045. 
Implications are twofold. First, an appraisal in Latin America can be anchored in regional CBA, explicitly stress-tested for climate variability and cross-border constraints. Second, a practical remuneration/financing pathway can be staged around: harmonized CBA and project screening; simulation of allocation of regulated cross-border transmission charges complemented by congestion revenues; and, blended finance packages with multilateral de-risking aligned with regional governance bodies (e.g., OLADE/CIER). Finally, we operationalize transparency and replicability through OIRSE (oirse.energia.la), an interactive platform that publishes scenario outputs to support evidence-based cooperation and investment design.

Climate variability is increasingly reshaping electricity systems with high exposure to weather-dependent resources. We analyze how climate shocks affect electricity generation in a power system dominated by hydropower, while emphasizing the systemic and stabilizing role of thermal plants. Our study focuses on Brazil, a country with a historically high dependence on hydropower and a growing penetration of wind and solar generation. In this context, we analyze how precipitation, temperature, solar radiation, and wind speed directly and indirectly influence electricity generation across different technologies and how these influences propagate through substitution mechanisms at the system level.
Using weekly plant-level generation data combined with climate data from NASA POWER, we first estimate panel models by technology to identify direct climatic effects. We then implement a three-stage least squares (3SLS) simultaneous equations model to address endogeneity in average generation and to gauge the joint determination of electricity supply across thermal, hydro, solar, and wind sources. Climate variables are used as instruments for endogenous generation, allowing us to identify structural relationships rather than mere conditional correlations.
Our main results show that precipitation positively affects hydropower generation, while extreme temperatures reduce output across multiple technologies. Most importantly, reductions in hydro generation lead to systematic increases in thermal dispatch, confirming a structural negative relationship between hydro and thermal generation. Climate shocks that affect renewable sources also propagate endogenously to other technologies, reinforcing the interdependent nature of system operation. Results also show that the recent rise of intermittent energy sources (solar and wind) in Brazil is introducing a new and complex relationship in the system.
Our findings demonstrate that thermal plants play a critical compensatory role, enhancing electricity supply security. Policy implications suggest that resilience strategies must balance renewable expansion with the preservation of operational flexibility in dispatchable generation to ensure reliability under increasing climate uncertainty.

Climate change commitments, net-zero targets, and regulatory pressures are accelerating corporate transitions toward sustainable business models. Firms are utilising several strategies including internal innovation and mergers and acquisitions (M&As) to augment the sustainability portfolio of their organizations (Flammer, 2021; Krüger, 2015). Markets increasingly evaluate such sustainability strategies as indicators of competitiveness and regulatory preparedness. However, firms differ in their pre-existing green innovation capabilities prior to the M&A deal. This variation can influence the anticipated strategic output from the acquisition and from the investors. This raises an important question regarding how markets respond when environmentally capable firms get involved in green versus non-green acquisitions, and whether green deals generate different market responses compared to non-green deals within the same firms.
The present study addresses this gap by focusing on publicly listed Indian firms possessing green patents and examines investor responses to green versus non-green merger and acquisition announcements between 2010 and 2024. Green deals are identified through text and content analysis done by researchers and also supported by Natural Language Processing (NLP), and market reactions are estimated using an event study approach based on the Fama–French asset pricing framework.
Results suggest that green acquisitions generate more positive abnormal returns relative to non-green acquisitions undertaken by the same firms, indicating that investors reward strategic alignment between internal environmental capabilities and external investments. The results further suggest that firms with stronger environmental innovation intensity experience greater valuation gains. 
These findings offer practical implications to managers, investors and industry stakeholders by highlighting how green acquisitions enhance market valuation when they reinforce existing environmental capabilities. While governments learn how capital markets encourage businesses to promote low-carbon transition pathways, they should use strategically consistent green investments to boost investor confidence.