Impact of environmental policy on investment efficiency: Evidence from the oil and gas sector in Canada

Based on the fact that Canada withdrew from the Kyoto Protocol in 2011, we study the impact of loosening environmental policies on firm performance of Canada's oil and gas sector. This work complements the limitation of Porter hypothesis, which only discusses the relationship between environmental policy and corporate performance from the perspective of strict environmental policy. Hence, this paper adopts investment efficiency to measure corporate performance, and discusses the long-term and heterogeneous effects of loose environmental policies on Canada's oil and gas firms. We find that environmental policy loosening is conducive to improving the investment efficiency of oil and gas enterprises, which declines annually and becomes stable at a certain level. However, the biggest beneficiaries of loose environmental policies are low-investment-efficiency firms and oil sand firms. This result suggests that environmental policy loosening can boost the performance of enterprises, but alleviate their emission reduction pressure at the same time.