Imperial Research Proposal Example: Sustainability practitioner to climate policy (Score 93)

Climate policy instruments are only as effective as the behavioural responses they generate. Carbon pricing schemes—whether emissions trading systems or carbon taxes—rest on the assumption that a sufficiently credible price signal will induce firms to invest in abatement. In practice, the relationship between stated policy ambition and observed corporate capital allocation is considerably messier. UK industrial emitters subject to the UK Emissions Trading Scheme since 2021 present a tractable case: the policy architecture is well-documented, sectoral emissions data are publicly reported, and the post-Brexit redesign introduced identifiable variation in price levels and coverage rules. This proposal asks: to what extent does the credibility of the UK ETS price signal—measured through price volatility, policy revision frequency, and coverage uncertainty—predict firm-level abatement investment decisions in energy-intensive manufacturing sectors between 2021 and 2024? Two subsidiary questions follow. First, do smaller firms respond differently to price signal instability than larger, compliance-experienced operators? Second, does the presence of supplementary regulatory obligations such as Climate Change Agreements moderate the relationship between ETS credibility and investment? The policy stakes are concrete. The UK Climate Change Committee's 2023 Progress Report identified persistent underinvestment in industrial decarbonisation as a material risk to the Sixth Carbon Budget pathway. Understanding whether that underinvestment is partly attributable to price signal design—rather than solely to capital cost or technology readiness—has direct implications for how the UK ETS is calibrated going forward. Two bodies of scholarship are directly relevant. The first is the environmental economics literature on carbon price credibility. Drawing on theoretical contributions from the price-versus-quantities debate and empirical studies of the EU ETS, this tradition establishes that investment in long-lived abatement capital is sensitive not only to the current carbon price but to expectations about its future trajectory and stability. Analyses of EU ETS Phase II and Phase III found that price collapse following over-allocation significantly dampened low-carbon investment signals even when average prices appeared adequate on paper. The second literature is the corporate strategy and sustainability governance scholarship examining how firms translate regulatory signals into capital planning. This strand tends to focus on voluntary commitments and stakeholder pressure rather than on mandatory pricing mechanisms, leaving a gap in understanding how mandatory price signals interact with internal investment governance. The gap this proposal addresses sits at the intersection of these two bodies of work. Existing quantitative studies of ETS investment effects largely use EU-level panel data and aggregate sectoral proxies; they rarely disaggregate by firm size or examine how supplementary instruments interact with the primary price signal. The UK ETS, as a post-Brexit redesign with its own auction mechanism and distinct coverage decisions, has not yet been studied at firm level with sufficient granularity to answer the credibility question directly. This is partly a data maturity issue—three full compliance years are now available—and partly a methodological one: credibility is not directly observable and requires a constructed index drawing on multiple policy-process indicators. The study adopts a quantitative panel design using firm-year observations drawn from two primary sources. Verified emissions and surrender data from the UK ETS registry, publicly accessible through the Environment Agency's public register, will provide the compliance-side outcome variable. Capital expenditure and low-carbon investment disclosures from company accounts filed at Companies House, supplemented where available by CDP industrial sector responses, will proxy for abatement investment decisions. The analytic sample is provisionally scoped to UK ETS-obligated installations in the iron and steel, cement, and glass manufacturing sectors—sectors with sufficient firm-level variation in size and compliance history to support disaggregated analysis. The central independent variable, ETS price signal credibility, will be operationalised as a composite index constructed from three observable indicators: realised UK ETS allowance price volatility measured as the standard deviation of weekly closing prices within each compliance year, the count of material policy revisions or consultation announcements within the year, and the share of allowances allocated by free allocation versus auction as a proxy for coverage uncertainty. This construction is adapted from approaches used in the EU ETS credibility literature and will be validated against qualitative policy chronology. The primary estimation strategy is a two-way fixed-effects panel regression, with firm and year fixed effects absorbing time-invariant firm characteristics and common macro shocks. The moderating role of firm size will be tested through an interaction term between the credibility index and log employment. Climate Change Agreement participation will be included as a binary moderator. Heteroskedasticity-robust standard errors clustered at the sector level will address within-sector correlation. As a robustness check, a difference-in-differences specification exploiting the 2023 UK ETS auction reserve price reform as a quasi-exogenous shock to price credibility will be estimated for the subsample of sectors most directly affected. Data access presents the most significant feasibility constraint. UK ETS registry data and Companies House accounts are publicly available and require no special permissions for the core analysis. CDP industrial sector data are available to academic researchers under a data access agreement, which I will apply for at the start of the programme. If that application is unsuccessful, the analysis will rely on mandatory Streamlined Energy and Carbon Reporting disclosures embedded in annual reports filed at Companies House, which cover a comparable population of large UK industrial emitters. The dataset will contain no personal data; all observations are at the installation or legal entity level, and the study therefore falls outside the scope of human subjects ethics review, though I will confirm this with the department's research ethics process at the outset. The provisional timeline allocates the first term to literature consolidation, index construction, and data assembly; the second term to panel estimation and robustness testing; and the third term to write-up and revision. The scope is calibrated for a one-year MSc dissertation: the firm-level panel is bounded to three compliance years and three sectors, and the research questions are answerable with publicly available data and standard econometric tools available in Stata or R. The main contingency risk is incomplete investment disclosure in company accounts for smaller obligated firms; if coverage falls below a workable threshold, the analysis will be restricted to the larger-firm subsample and the firm-size moderation question reframed as a descriptive comparison rather than a formal interaction test. Imperial's Centre for Environmental Policy hosts research on climate governance, carbon markets, and the political economy of decarbonisation policy. The MSc Climate Change and Policy programme's emphasis on quantitative and policy-analytical methods aligns directly with the panel econometric approach proposed here. The proposal draws on skills developed in prior quantitative sustainability analysis and in a policy memo project examining the translation of climate evidence into regulatory instruments, work that established familiarity with UK ETS mechanics and with the gap between policy design intent and firm-level response. The research question emerged from that applied work and is tractable within the MSc dissertation format. I would welcome discussion with faculty working on carbon market design or industrial climate policy about whether the credibility index construction and the identification strategy are appropriately specified for the available data.