What if companies had to pay for the problems their carbon emissions cause? Their profits would plunge, according to new estimates, possibly wiping out trillions in financial gains.
These results, spelled out in a recent study in the journal Science, are based on analysis of almost 15,000 publicly-traded companies around the world. To calculate how much each ton of carbon emissions ends up costing society, economists used the U.S. Environmental Protection Agency’s estimate of $190 per ton, Grist reports.
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For all of those companies combined, the damage would run into the trillions of dollars, study co-author Christian Leuz, a business professor at the University of Chicago, told the Associated Press. The researchers only included direct emissions from companies, not “downstream” emissions related to the products they sell. (So emissions from the operations needed to build a car would count; the pollution that comes out of its tailpipe wouldn’t.)
They found that the cost of the damage surpassed profits for highly polluting industries, including energy, utilities, transportation, and materials manufacturers—a group that accounted for 89% of the total. Researchers didn’t name any specific companies.
The study arrived during a summer when the costs of climate change were coming clearly into view, as historic flooding, deadly wildfires, and frequent heatwaves rattled countries around the world, Grist notes.
But even as the toll of carbon emissions becomes apparent, governments are pouring more money into support for fossil fuel companies than ever before. Last year, subsidies for oil, coal, and natural gas reached a record high of US$7 trillion, according to a report late last month from the International Monetary Fund, which works out to $13 million every minute. That’s nearly double what the world spends on education and equal to roughly 7% of global economic output.
Subsidies often come in the form of tax breaks intended to keep people’s gas prices and energy bills low, Grist notes, but they carry huge costs, slowing the shift to a cleaner economy.
The economists behind the new study of corporate emissions make the case that forcing companies to disclose their greenhouse gas pollution is a start toward decreasing emissions. Some governments are starting to move in that direction: The European Union adopted rules earlier this year that will require companies to disclose their emissions, following a similar move by the UK in 2022. It’s an approach also being considered by the U.S. Securities and Exchange Commission and California lawmakers.
There’s some evidence that such disclosures could enable more public pressure on companies and prompt them to reduce emissions. One study found that contamination levels dropped after fracking companies were forced to disclose their pollution.
“Put plainly,” the study concludes, “it is difficult to imagine a successful approach to the climate challenge that does not have widespread mandatory disclosure as its foundation.”
This story originally appeared in Grist and is part of Covering Climate Now, a global journalism collaboration strengthening coverage of the climate story.
