The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme

Brouwers, Roel; Schoubben, Frederiek; Hulle, Cynthia Van

doi:10.1002/bse.2193

Cited by 80 publications

(40 citation statements)

References 82 publications

(160 reference statements)

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“…At the same time, they find that companies that did not have this opportunity had their returns reduced by the costs. A similar relation was found by Brouwers, Schoubben, and van Hulle (2018) who show that some companies can pass on the cost of carbon to their customers because they have no competing companies in their field and can set their own prices. According to their study, a good carbon performance (lower emissions) only leads to better financial performance for companies that are not able to pass on their carbon costs.…”

Section: Background and Related Literaturesupporting

confidence: 77%

Investors' carbon risk exposure and their potential for shareholder engagement

et al. 2020

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This article examines the exposure to and management of carbon risks of different investor types. Considering the dual role as portfolio manager and partial owner, we analyze carbon risk for investors both in terms of exposure to portfolio values and in terms of responsibility as shareholder of carbon‐intensive firms. We show that among various investor types, the preference for holding carbon‐intensive stocks differs substantially, even when considering traditional investment decision parameters. In particular, it is governments whose portfolio values are most threatened by a carbon risk exposure of 49%, but at the same time, they prefer larger ownership shares in polluting firms. In contrast, individual investors, investment advisors, and mutual funds avoid holding stakes in these firms, while revealing only a moderate exposure of their assets to carbon risk. In view of the Paris Agreement, which includes the consistent steering of financial flows towards a low carbon transformation of the economy, our study provides policymakers with important implications regarding the coverage and effects of respective regulations. By identifying the ownership structures of carbon‐intensive firms and respective owners' portfolio compositions, we also offer implications for further research on portfolio decarbonization and shareholders' influence of corporate carbon management.

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Section: Background and Related Literaturesupporting

confidence: 77%

Investors' carbon risk exposure and their potential for shareholder engagement

et al. 2020

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“…Clarkson et al (2015) evaluated the impact of EU ETS on firm market value for 2006–2009 and found that EU ETS negatively affects firm market value if free allocation is lower than produced emission, and if the firm cannot transfer compliance costs to consumers. Brouwers et al (2018) investigated the first and second phases of EU ETS implementation and confirmed the results of Clarkson et al (2015). Czerny and Letmathe (2017) analysed the relationship between the environmental and economic performance of firms under the EU ETS first and second phases and found no significant relationship between the two.…”

Section: Literature Reviewsupporting

confidence: 64%

Disentangling economic crisis effects from environmental regulation effects: Implications for sustainable development

et al. 2021

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With climate change becoming more severe, policy makers must impose environmental regulations that will lead firms to adopt sustainable corporate models. According to the Porter hypothesis, environmental regulation can favour the implementation of business strategies that improve economic and environmental performances. In this study, we examine how one such form of regulation, the European Union Emission Trading Scheme (EU ETS), impacts firm performance, and we subsequently widen the examination beyond the regulation to evaluate an economic crisis which could potentially confound regulation effects. We estimate a panel model with time-and firm-fixed effects for different subsamples that disentangle the effect of the EU ETS policy from the 2008 economic crisis. The results indicate that the EU ETS policy in its third phase can activate the Porter hypothesis and is effective in fuelling the implementation of sustainable corporate models by firms. However, we also find that the economic crisis neutralises the effects of the regulation on firm performance, precluding the triggering of the Porter hypothesis in severely affected firms.

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“…Borghei et al analyzed the annual reports of Australian firms and found that the return on corporate assets increased in the year following carbon information disclosure, noting that carbon information disclosure positively affects corporate financial performance [34]. Brouwers et al stated that carbon performance and information disclosure have a positive impact on corporate financial performance in the long run [35].…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Carbon Disclosure on Financial Performance under Low Carbon Constraints

Zhu

Zhang

2021

Energies

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In the context of low-carbon constrained development, in order to avoid the risk brought by climate change, more and more companies choose to disclose carbon information, respond to the national policy of carbon emission reduction and focus on the sustainable development of enterprises. This paper will investigate the impact of carbon disclosure on financial performance based on the 2011–2018 CDP report, taking the Fortune 500 companies as a sample. The study finds that for carbon-intensive industries, carbon disclosure cannot significantly contribute to the improvement of financial performance in the current period, but for carbon-non-intensive industries, carbon disclosure can significantly contribute to the improvement of financial performance in the current period, and the positive impact of carbon disclosure on financial performance in the current period can be extended to the next period. Finally, based on the findings of the empirical study, this paper puts forward policy recommendations for the construction of China’s carbon disclosure system.

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The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme

Cited by 80 publications

References 82 publications

Investors' carbon risk exposure and their potential for shareholder engagement

Investors' carbon risk exposure and their potential for shareholder engagement

Disentangling economic crisis effects from environmental regulation effects: Implications for sustainable development

The Impact of Carbon Disclosure on Financial Performance under Low Carbon Constraints

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