Carbon pricing and revenue growth valuation risk exposure

Abstract

Purpose

Two research questions are examined in this study: First, whether carbon prices affect valuation risk exposure to revenue growth? Second, do carbon emission reductions affect the link between carbon pricing and revenue growth valuation risk?

Data & estimation techniques

The data used in the study is drawn from secondary sources like the world bank portal and carbon pricing database for the sample period 2016–2022. This study uses different statistical techniques for addressing the research questions raised. These techniques include Univariate analysis, regression analysis- OLS, Quantile regression and System Dynamic GMM regression for robustness checks. This study uses propensity score matching technique for verifying if the sample selection bias affects the results. Pre-diagnostic tests for normality include.

Shapiro-Wilk Test, Shapiro-Francia Test, Skewness/Kurtosis Test.

Findings

The study's findings show that the increase in carbon costs decreases revenue growth thereby increases the valuation risk exposure. A one percent increase in carbon price considerably raises the valuation risk of export trade revenue growth. According to this analysis, the relationship between carbon pricing and revenue growth valuation risk is moderated by lower carbon emissions.

Implications

This study shows how carbon pricing affects plastic-intensive companies' revenue growth and policy and regulation. It shows how lower carbon emissions affect carbon pricing and income growth. Revenue growth will be steady for companies that reduce emissions and combat rising costs of carbon. Carbon-intensive companies risk losing income due to market and regulatory pressures.