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The curious case of Canadian corporate emissions valuation

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  • Griffin, Paul A.
  • Lont, David, H.
  • Pomare, Carol

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.

Suggested Citation

  • Griffin, Paul A. & Lont, David, H. & Pomare, Carol, 2021. "The curious case of Canadian corporate emissions valuation," The British Accounting Review, Elsevier, vol. 53(1).
    • Handle: RePEc:eee:bracre:v:53:y:2021:i:1:s0890838920300421
    DOI: 10.1016/j.bar.2020.100922
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    Cited by:

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    More about this item

    Keywords

    Canadian greenhouse gas emissions; Carbon disclosure project; Emissions valuation; Emissions intensity; Decarbonization;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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