Four Essays on Environmental Economics and Environmental Financial Assets

This dissertation focuses broadly on topics found in the intersection of environmental and financial economics. More specifically, it consists of four chapters exploring topics related to carbon markets and environmental finance.The first chapter is concerned with the informational efficiency of the European Union's Emissions Trading System. Using time series data, I test four annual emissions futures contracts for weak-form informational efficiency. My methodology consists of statistical tests common to the time series literature and an analysis of algorithmic trading rules. These methods allow me to draw comparisons to prior studies and contribute to the literature on the evolution of informational efficiency in these markets over time. My work is novel in its temporal scope; to the best of my knowledge, it is the first study to examine informational efficiency during the COVID-19 pandemic. Overall, I find mixed evidence of weak-form informational efficiency in the futures markets.The second and third chapters use separate, but complementary, methods to study the effects of tropical cyclones, floods, and severe storms on the stock returns of clean energy and fossil fuel firms in the United States. The second chapter uses an event study framework with a five-factor model for normal returns, finding that average abnormal returns and cumulative average abnormal returns are negatively affected by the disasters. Additional analysis reveals that changes to the firm-level cumulative abnormal returns are driven by a number of factors, including the firms' returns on assets, environmental ratings, classification (i.e., clean energy vs. fossil fuels), interface (i.e., consumer-facing vs. non-consumer-facing), and size.The third chapter studies the same natural disasters as those analyzed in the second chapter, but the methodology consists of conditional heteroskedasticity models. Grouping the clean energy and fossil fuel firms into custom stock indices, I find no evidence that the events affected the returns of the clean energy companies. I do, however, find evidence of negative effects to the returns of the fossil fuel companies. The fact that I do not find evidence of impacts to the clean energy returns provides some evidence that disasters can be ``diversified away'' through stock aggregation, a phenomenon that has been noted in prior studies. I also find evidence that returns for both firm types are impacted by changes in risk introduced by the disasters. Overall, the results of the second and third chapters indicate that the natural disasters did impact return and volatility dynamics in the market. The final chapter presents a critical analysis of Clean Development Mechanism (CDM) projects in China and India and studies the feasibility of a national-level emissions trading program in India. I find that foreign investment in CDM projects was disproportionate between the two countries, with China benefiting from substantially more investment than India. Comparing India's proposed emissions trading system with the 10-step guideline developed by the World Bank, I highlight successes of the policy process thus far and weaknesses that require future attention.