Using data on carbon emissions reported by Australian companies from 2009 to 2015, we examine the effect of carbon emissions on firm value. We investigate how the introduction of an Australian emissions pricing scheme, the Clean Energy Bill, affects this relationship. Results show that the level of direct emissions is negatively associated with a firm?s market value. The negative effect becomes stronger during the period when the Clean Energy Bill became effective. When firms are separated according to whether they provide voluntary carbon information in addition to their mandatory disclosures, negative effects of direct emissions are found in the group with low disclosure scores and in the group with poor carbon management performance. Overall, the results indicate that the market penalizes firms based on their direct carbon emissions and that this penalty is imposed only on firms that have low disclosure scores or poor carbon management performance.
- Carbon emissions
- Clean Energy Bill
- National Greenhouse and Energy Reporting Act
- value relevance