Multilevel Climate Governance and Firm Engagement in Voluntary Carbon Markets

• In Event: Poster Session: Science, Technology, and Environmental Policy 1 & Comparative Health Policy
  In Poster Session: Poster Session 1: Science, Technology, and Environmental Policy

Abstract

Private actors are deeply involved in global climate governance. While public regulations mandate certain firms to curtail carbon emissions, a significant proportion of firms engage in decarbonization voluntarily, such as through participation in voluntary carbon markets (VCMs). Why do some firms choose to participate in VCMs, whereas others do not? To understand this phenomenon, we introduce a multi-level theoretical framework of global governance. We conceptualize VCMs as a unique voluntary program unrestricted by sovereign boundaries that can yield broader co-benefits to local communities and exhibit institutional interactions with public rules. Specifically, we posit that the firm-level environmental, social, and governance (ESG) structure, national-level institutional complementarity with compulsory carbon markets, and transnational-level international non-governmental organizations (INGOs) climate shaming are instrumental in driving corporate participation in VCMs. Leveraging an original panel dataset of 1,265 large-scale firms from 48 countries and multiple approaches to address endogeneity, we investigate whether and through which mechanisms the factors at different levels may affect corporate participation in VCMs. Our study finds that corporate ESG structure, carbon market complementarity, and transnational INGO climate shaming are strongly associated with corporate engagement in VCMs. Furthermore, results from causal mediation analysis suggest that INGOs employing climate shaming tactics can change corporate behavior toward more pro-environmental by prompting governments to enhance climate regulation stringency. The effects of carbon market complementarity are mediated by firm-level emission reduction policies, while corporate ESG structure affects firms’ participation in VCMs through the mediation of corporate commitments to Sustainable Development Goals (SDGs). Our findings contribute to understanding the regime complex for global climate governance and highlight the interplay of corporate actions, domestic regulations, and transnational advocacy in shaping voluntary climate responsibility.

Authors

• Mengying XIE, School of Public Policy and Management at Tsinghua University

• Ling Chen, Tsinghua University