Regulations to limit carbon emissions force businesses to carefully consider the best strategy for managing carbon. We outlined a uniform methodology for examining the trade-offs that carbon pricing for businesses presents and the best way for those businesses to respond. According to our model, as it gets more expensive to comply, polluting companies shift their green investment mix toward more immediate yet short-lived solutions, such as just cutting emissions (abatement), rather than investing in green innovation. Larger carbon credit balances under emissions trading schemes impede businesses' attempts to cut back on their carbon emissions. Our analysis shows that if companies are sufficiently dedicated to lowering their carbon footprint, carbon regulation does not necessarily result in a fall in shareholder value.