Lobbying and Fossil Fuel Investment

This study explores the impact of the lobbying activities of oil and gas companies on their corporate investment decisions. Using a sample of listed oil and gas companies in the U.S. from 2000 to 2019, this study finds that in comparison with non-lobbying firms, lobbying companies’ capital expenditures increase by 6.2% and their oil and gas reserves’ growth rate increases by 16.4% in the year following lobbying. The amount of lobbying expenditures is also positively associated with fossil fuel investments. The results remain robust when an instrumental variable approach is applied to address endogeneity concerns. Our plant-level analysis indicates that political lobbying by fossil fuel parent companies does not enhance abatement investment alongside conventional energy, but instead, it raises pollution emissions. Further investigation shows that lobbying activities significantly boost the financial performance of fossil fuel companies without reducing their political risks or exposure to climate change policy uncertainty. Taken together, this study suggests that lobbying improves the financial performance of oil and gas companies and leads to an increase in their fossil fuel investments.