Beyond Borders: Analyzing Cross-Border Regulatory Impacts on Canadian and American Energy Firms

As the world advances toward Net Zero by 2050, the energy sector faces the complex challenge of balancing the energy trilemma of accessibility, affordability, and security. This study examines the cross-border impacts of climate-related energy regulations between Canada and the United States on market returns. Utilizing an event study methodology with market model-derived cumulative abnormal returns, the analysis evaluates financial performance responses to 154 policy announcements (2010-2024) across 24 energy firms. The findings reveal significant variability in regulatory impacts, highlighting how seemingly similar climate policies produce widely divergent market outcomes across different energy segments. Notably, renewable energy firms frequently experience more adverse market reactions than their fossil fuel counterparts, challenging conventional assumptions regarding regulatory benefits to green industries. Substantial cross-border asymmetry exists with U.S. policies demonstrating stronger influence on Canadian firms than vice versa, creating cross-border investment optimization opportunities for investors. Temporal variations indicate that initial positive market responses often reverse over extended timeframes as implementation challenges materialize. This pronounced variability in policy impacts should give both regulators and firms pause when designing regulations or corporate strategies, including lobbying positions. The research illuminates a fundamental misalignment between energy efficiency objectives and growth prospects for all energy producers, as policies reducing aggregate energy demand negatively impact producer valuations regardless of energy source. These findings suggest current regulatory frameworks may insufficiently address structural advantages maintained by fossil fuel companies, indicating effective policy design requires greater attention to cross-border implications and integration of efficiency measures with transition support.