Get Involved Early in Emissions Trading Talks

Get Involved Early in Emissions Trading Talks

Firms can benefit from considering their role in emissions trading early to stay ahead of regulation and competition. 
Lauren Rakowski August 29, 2010
Jonatan Pinkse and Ans Kolk examine multinational corporations' (MNC) strategic responses to emissions trading schemes. Of 331 of the 500 largest companies in 2006, 72 were involved in the European Union Emissions Trading System (EU-ETS), 62 were considering trading, and 65 had no trading strategy.

EU-ETS: A Pillar of EU Policy on Climate Change

The EU-ETS was developed in 2005 in Europe and by 2006 was the world's most prominent trading scheme. It placed constraints on many EU companies and their subsidiaries. Other schemes included the UK-ETS, NSW, RGCI, and Chicago Climate Exchange. Credits have also been traded under the Clean Development Mechanism or Joint Implementation mechanisms of the Kyoto Protocol.

Benefits of Early Involvement in Emissions Trading

Many firms participated in EU-ETS because they faced emissions caps and non-compliance penalties. Some firms were waiting for clarity on trading rules before acting. Still, others did not want to be part of a voluntary scheme.

Regardless of their position, Pinske and Kolk found firms may benefit from considering their role in emissions trading early. Early considerations help firms stay ahead of regulation and competition.

Key Findings from 331 Companies

Implications for Managers

Consider the geographic spread of your business. Are emissions trading schemes or regulations emerging in countries where you operate?

Be aware of trading schemes and policy developments to proactively assess if and how your firm will be affected. Consider participating in emissions trading talks early in the game. A spot at the table will help you stay ahead of regulation – and the competition.

Implications for Researchers

We suggest researchers follow how firms respond strategically as emissions trading becomes more widespread.


This study looks at the strategic responses of 331 Global 500 companies using a questionnaire from the 2006 Carbon Disclosure Project. Companies are mainly from the U.S, Europe, Japan, Canada, and Switzerland. Industries include banks, oil and gas, electricity, insurance, IT retailers, telecommunication, pharmaceuticals, automotives, electronics, and utilities.
Pinkse, Jonatan, & Kolk, Ans. (2007). Multinational Corporations and Emissions Trading: Strategic Responses to New Institutional Constraints. European Management Journal, 25(6): 441-452.

additional resources

Topic Blog

Business should engage on environmental policy issues for a win-win situation

Bushra Tobah
Systematic Review

Conversations about sustainability need shared understanding to move from rhetoric to effective, collective action. Civic dialogue allows that to happen.

Reports and Articles

As an engineer, Tom Webler knew how materials would respond to certain conditions. As a sociologist, he is dedicated to involving citizens in public policy.

Maya Fischhoff
Reports and Articles

Public policies and engaging in environmental policy can have major implications for your company’s operations and profitability.

Graeme Auld