Market Valuation of Corporate CO₂ Emissions, Disclosure and Emissions Trading

Abstract

In this research, we investigated (1) whether corporate CO2 emissions have a negative impact on market value, (2) whether disclosure of CO2-related information alleviates the negative impact on market value, and (3) whether participation in emissions trading schemes alleviates the negative impact on market value. Using data on greenhouse gas emissions under the Global Warming Measures Law, CO2-related disclosure (companies answering to the CDP questionnaire), and emission trading (companies participating in JVETS), we performed a regression analysis based on the Ohlson model (2001). The results of the analysis are as follows. (1) CO2 emissions have a significant negative impact on the market value, given net assets, earnings before extraordinary items, and earnings forecasts. (2) CO2-related disclosure alleviates the negative impact on the market value. (3) Participation in emissions trading schemes alleviates the negative impact on the market value but insignificant at the standard level. (4) As a result of additional analysis, we find, for companies participating in emissions trading schemes, CO2 emissions do not have a significant negative impact on market value. Overall, our results indicate that corporate CO2 emission information, disclosure of CO2-related information, and the data of participation in emissions trading schemes are incorporated in investors’ decision-making.