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Keywords:

  • emission trading;
  • climate change;
  • environmental strategy;
  • corporate strategy;
  • multinational corporations

Abstract

The adoption of the Kyoto Protocol in 1997 has led to increasing business interest in the issue of climate change. It has also created much uncertainty for companies, particularly about the role of trading in realizing emission reductions. This paper investigates what drives multinational corporations to show interest in emission trading and carbon offset projects to deal with climate change. On the basis of an analysis of data of 136 companies derived from a questionnaire, it also examines the role that country of origin, industry affiliation and companies' environmental strategy play in this regard. Findings show that industry pressure and product and process innovations are the main determinants for multinational corporations to participate in the emission market. It appears that climate policy particularly induces energy-related industries to reduce emissions, which puts them ahead of other industries with regard to their interest in emission trading. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.