The curious case of Canadian corporate emissions valuation

Paul A. Griffin, David Lont () and Carol Pomare

The British Accounting Review, 2021, vol. 53, issue 1

Abstract: This study examines the relevance to investors of the greenhouse gas (GHG) emissions of publicly-traded Canadian firms over 2006–2018. Based on two independent datasets, we document that firm value varies positively in the level of emissions. This result suggests that the Canadian setting differs from those studied previously, notably because of low climate litigation risk and national and subnational expenditure policies to offset climate impacts on the economy. While national and subnational expenditures to mitigate emissions affect firms' on-balance-sheet costs and profits, investors price the future payoffs to these expenditures into firm value. Supporting this view, we find that the positive relation between emissions and firm value in Canada is amplified for high GHG-intensity firms (mainly energy firms in Alberta), whose future payoffs to environmental policies and spending exceed those of low GHG-intensity firms. Our results are consistent with investors’ recognition of the benefits to firm value of national and subnational policies to decarbonize the Canadian economy.

Keywords: Canadian greenhouse gas emissions; Carbon disclosure project; Emissions valuation; Emissions intensity; Decarbonization (search for similar items in EconPapers)
JEL-codes: G10 M41 M48 Q51 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:53:y:2021:i:1:s0890838920300421

DOI: 10.1016/j.bar.2020.100922

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