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

Abstract Business interests have often stymied progress on climate policy, raising the question of the source of business opposition to decarbonization policy. We bring intertemporal trade-offs 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 trade-off: 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 trade-off. 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 microfoundations of long-term policy making. The greater an economy’s exposure to impatient capital, the more business opposition policy makers are likely to face in adopting long-term policies.