Corporate Carbon Emissions Equated to 44 Percent of Profits

They note that while the Trucost sample represented more than 80 percent of global public-market capitalization, it did not include private firms. Moreover, the data were disclosed voluntarily without penalties for misrepresentation or mistakes—underscoring the need for mandatory and independently verified emissions reporting.

But using this snapshot of the world’s public companies, the researchers project both a large average cost of corporate carbon damages and large variation—between countries, between industries, and even within industries. For example, companies in Russia, Indonesia, and India had the worst damages, the study finds, with Russian averages exceeding 129 percent of profits. Companies in France, the United States, and the United Kingdom came in toward the bottom of the scale; US damages were on average at just over 25 percent of profits.

The utilities, materials, energy, and transport industries were collectively responsible for almost 90 percent of corporate carbon damages, while the cost of emissions from the banking and insurance sectors amounted to less than 1 percent of their profits.

But there was also substantial variation within industries, even subindustries. The researchers illustrate this variation for the diesel-powered rail transportation sector, in which some companies caused damage equivalent to 31 percent of profits, whereas others’ emissions were half that, in profit terms.

The findings highlight the potential importance of mandated carbon disclosure as a foundation not only for future policy or for pricing in markets, but also for peer benchmarking. The documented variation in carbon damages within peer groups will facilitate comparing companies in terms of their environmental impact, the researchers argue. Ultimately, they write, transparency could prompt big polluters to reduce their emissions to match cleaner competitors, either voluntarily or because of pressure from shareholders or consumers.