Fighting the Future: Short-Term Investors and Business Opposition to Climate Policy

Business interests have often stymied progress on climate policy, raising the question of the source of business opposition to decarbonization policy. We bring time into the study of business and climate change to build new theory on the relationship between firm ownership and policy opposition. Climate policy confronts companies with an intertemporal tradeoff: incur costs today for gains in the future. Firms with short-term owners face pressure to maximize short-term profits, making them unable to undertake this tradeoff. They therefore oppose climate policy. We test our argument using a dataset of US firms and an original firm-level measure of climate policy opposition. Firms most exposed to short-term capital oppose policy more than observably similar firms with long-term ownership. Our theory develops the micro-foundations of long-term policymaking. The greater an economy’s exposure to impatient capital, the more business opposition policymakers are likely to face in adopting long-term policies.