Authors: Matteo Crosignani, Emilio Osambela, and Matthew Pritsker
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Staff Reports
Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market
Number 1161
August 2025
August 2025
JEL classification: D62, G11, G12, Q54
Are carbon emissions priced in equity markets? The literature is split with different approaches yielding conflicting results. We develop a stylized model showing that, if emissions are priced, stock returns depend on expected emissions and the product of the innovation in emissions and the price-dividend ratio. Building on this insight, we derive and test new predictions. We find that emissions are priced in equity markets, but the magnitude of such pricing is highly sensitive to the inclusion of a few “super emitters” (mostly operating in electric power generation). Our theoretical insight also helps reconcile seemingly divergent results in the literature.
Author Disclosure Statement(s)
Matteo Crosignani
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.”
Emilio Osambela
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.”
Matt Pritsker
I declare that I do not have relevant or material financial interests that relate to the research in the paper titled “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.”
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.”
Emilio Osambela
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.”
Matt Pritsker
I declare that I do not have relevant or material financial interests that relate to the research in the paper titled “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.”
Suggested Citation:
Crosignani, Matteo, Emilio Osambela, and Matthew Pritsker. 2025. “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.” Federal Reserve Bank of New York Staff Reports, no. 1161, August. https://doi.org/10.59576/sr.1161
Crosignani, Matteo, Emilio Osambela, and Matthew Pritsker. 2025. “Understanding the Pricing of Carbon Emissions: New Evidence from the Stock Market.” Federal Reserve Bank of New York Staff Reports, no. 1161, August. https://doi.org/10.59576/sr.1161
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