Does carbon capture & storage mitigate carbon premium? Evidence from patents

We study firm-level patenting in Carbon Capture & Storage (CCS) technologies and its effect on their stock market performance by focusing on firms which patented related technologies at least once in the period 2000-2022. Joining patent data from Orbis IP with balance-sheet, financial and non-financial company data from Orbis and Eikon Refinitiv, we study CCS patenting both at the extensive and at the intensive margin. We find that CCS patents behave consistently with other eco - innovations and respond to the environmental pressure exercised by direct emissions. Then, motivated by recent findings of a carbon risk premium (Bolton and Kacperczyc, 2021), we investigate whether CCS patenting may reduce the risk premium requested by investors to high-carbon emitters by estimating the effect patenting these technologies on stock market returns and on market value. We find that CCS are significantly perceived by the markets as adding value, also by mitigating carbon premium, when environmental pressure is high.