Businesses around the world generate so much climate change pollution that they could eat up about 44% of their profits if they had to pay compensation, according to a study of economists at nearly 15,000 public companies .

In data not included, one of the study’s authors estimated that the “corporate carbon damage” of those public companies analyzed (a small fraction of all firms) could be in the trillions of dollars globally, with a significant impact on the U.S. For companies, it amounts to hundreds of billions of dollars. Published research. This is based on the cost of CO2 pollution proposed by the US government.

Nearly 90 percent of the calculated losses came from four industries: energy, utilities, transportation and the manufacture of materials such as steel. The study, published Thursday in Science by a team of economists and finance professors, looks at what new government moves to require companies to report their emissions of heat-trapping gases mean for corporate profits and the ecological health of the world. wearing something.

Earlier this year, the European Union enacted rule Companies will eventually be required to disclose their carbon emissions, and the U.S. Securities and Exchange Commission and the state of California are considering similar regulations.

“The idea of ​​exposing corporate activities that impose costs on society is very powerful, but it’s not enough to save the planet,” said study co-author Christian Leutz, a professor of finance and accounting at the University of Chicago. A study in the United States found that after fracking companies disclosed their contamination rates, pollution levels dropped by 10% to 15%.

The idea, Leutz said, is that consumers and shareholders will see the damage and force companies to get cleaner.

Outside economists agree.

Leuz and his colleagues used a private analysis firm to find or estimate the carbon emissions of some publicly traded companies and analyzed the carbon pollution of 14,879 companies. They then compare them to company revenue and profits.

The calculations show “which activities are particularly costly to society from a climate perspective,” Leutz said. However, he cautioned, “it would not be right to blame the companies alone. It is impossible to divide responsibility for these damages between the companies that make the products and the consumers who buy them.”

Leutz said the calculations were for a small fraction of global companies, with many public companies not included and private companies not listed at all.

Instead of identifying or teasing out individual companies, economists group companies by industry and country. They only use direct emissions, not what happens downstream. So the gasoline in your car doesn’t count toward oil company emissions or corporate carbon emissions. The calculation uses the US Environmental Protection Agency’s cost of CO2 emissions of $190 per ton, and the study does not give a bottom-line figure in dollars, only a percentage of profit and revenue. Leutz didn’t estimate the amount in the trillions of dollars until asked by The Associated Press.

At $190 a ton, the average utility’s losses are more than double its profits. The materials manufacturing, energy and transportation industries all suffered losses that outstripped profits on average.

On the other hand, the average climate loss in banking and insurance is less than 1% of its profits.

When looking at companies by country, Russia and Indonesia have the highest levels of corporate climate damage, while the UK and the US have the lowest. Leutz said this reflects the age and efficiency of the company, as well as the type of industry in the country in which it operates.

This section of the New Jersey Turnpike in Carteret, NJ is crowded with multiple emission sources.

Kena Betancur/VIEWpress

Current accounting system ‘a mess’

Several outside experts said the study made sense to a certain extent, while some found problems with the choice of what was calculated and said not counting downstream emissions was a problem. Bill Hare, chief executive of Climate Analytics, which studies global emissions and efforts to reduce them, said that because it wasn’t counted, it “doesn’t provide the incentives to reduce those emissions to the levels needed”.

“The results are important, but perhaps not that surprising,” said Stanford University economist Marshall Burke. “The bigger takeaway is the number of caveats required to do this analysis, which suggests that our emissions accounting system It’s such a mess right now.”

Greg Maran of Appalachian State University, who tracks emissions in countries around the world, said: “Good data really lets us know who is producing what consumers want while contributing the least to climate change.”

Paul Romer, a Nobel laureate and former World Bank economist, said loss estimates were useful but needed to be interpreted precisely, “without a moral framework and an impulse to induce punishment.”

Romer cites his move from New York to Boston as an example. The initial move will be affected by the moving company’s corporate carbon damage, but when he removes some books from the house, they won’t. Misusing company carbon emissions data could put the moving company out of business and he’ll be driving his stuff so the total carbon footprint doesn’t change. Switching to zero-carbon fuels makes more sense, he said.


The AP’s climate and environment coverage is supported by several private foundations. See more about AP’s climate initiative here. The Associated Press is solely responsible for all content.

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