Assessing Size of Corporate Carbon Damages

Following similar efforts by the European Union and the United Kingdom, the U.S. Securities and Exchange Commission recently proposed a rule that would mandate that public companies report their greenhouse gas (GHG) emissions. In a Policy Forum, Michael Greenstone and colleagues draw on one of the largest global datasets – covering roughly 15,000 public companies – and offer an estimate of what a widespread emissions reporting mandate could uncover about the extent of climate damages caused by corporate greenhouse gas emissions. They estimate that average corporate carbon damages – a measure of the total monetary value of climate damages caused by each company's GHG emissions – are high, but vary greatly across firms within an industry, across industries, and across countries. The top four industries account for 89% of the total global corporate carbon damages, with the largest carbon damages occurring in the energy-intensive industries, including utilities, materials, energy, transportation and food, beverage, and tobacco. What's more, variation in carbon damages across countries is also substantial, and influenced by differences in industrial composition. "Revealing corporate carbon damages would start a public dialogue about the contribution of corporate activities to the climate problem, which in turn could spur policies and unleash market forces," write Greenstone et al. "Put plainly, it is difficult to imagine a successful approach to the climate challenge that does not have widespread mandatory disclosure at its foundation."