Joëlle Noailly
- 31 August 2026
- WORKING PAPER SERIES - No. 3278Details
- Abstract
- This paper examines whether environmental policy uncertainty undermines clean-technology investment in the United States by weakening policy-induced investment incentives. Using quarterly project-level data on U.S. greenfield investments from 2007Q1 to 2019Q1, combined with novel news-based indices that separately measure environmental policy salience and environmental policy uncertainty, we find that policy uncertainty substantially offsets the positive investment effects of environmental policy. At the aggregate level, a one-standard-deviation increase in environmental policy uncertainty eliminates roughly 75% of the policy-induced increase in the number of cleantech projects and around 50% of the increase in capital expenditure. The deterrence effect is substantially stronger for foreign than for domestic investors, consistent with greater informational frictions facing cross-border capital. These effects persist for at least two years following an uncertainty shock and are corroborated by country- and firm-level analyses, though results for capital expenditure are less robust at disaggregated levels. The findings imply that policy credibility is a first-order determinant of clean investment: an environmental policy framework that is ambitious but perceived as unstable may fail to mobilize the capital it is designed to attract.
- JEL Code
- Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity