Abstract. We identify a novel behavioral driver of environmental performance, showing that an increase in country-level consumer sentiment leads to a reduction in greenhouse gas emissions over a multiyear horizon. The effect is robust to sports-sentiment instrumental variables and stronger in countries where sentiment is a more reliable signal for the state of the economy. Consistent with a productivity channel, high sentiment is followed by improvements in energy efficiency and shifts in the composition of green electricity production toward newer technologies. Overall, our results suggest that policies boosting economic expectations can yield substantial environmental benefits.
Coauthor. George Constantinides (University of Chicago, NBER).
Manuscript. You can find the latest draft here.
Working paper series. University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2026-66.
Presentations. ASFAAG Conference at Florida International University, Financial Economics Meeting at the Paris EDC Business School, GRASFI Conference at HEC Liège, International Conference on Empirical Economics at Pennsylvania State University, International Symposium on Climate, Finance, and Sustainability at the Paris House of Management Science, London International Behavioral Finance Conference.