Carbon trading to hit US profits: survey

Carbon trading could erode earnings for around 15 per cent of the biggest companies in the US.

In a survey of the Standard & Poor's 500 index of the biggest publicly-listed companies in the US, some “could face costs that could more than offset all their earnings,” the authors said.

The report said carbon costs would amount to less than 1 per cent of earnings for 203 companies analyzed, while 71 companies could see earnings fall by 10 per cent or more.

The greatest variation is in the most carbon-intensive sectors, with utilities on average taking a 45 per cent hit on revenues if they had to pay for all their emissions, the report added.

Resources industries, such as metals and mining, is the second-most exposed sector, followed by food and beverage companies, chemicals, and oil and gas.

"The analysis makes clear that a cap-and-trade system is a real game changer,” said Jon Lukomnik, program director at the not-for-profit Investor Responsibility Research Center Institute, which commissioned the report.

He added: “A number of companies will have to reform how they think about carbon emissions and the associated costs, or their bottom line will suffer greatly."

The report said the proposed cap-and-trade legislation under consideration by the US Congress would make new carbon costs explicit.

“This adds urgency to the need for investors to consider developing a framework to consider climate change issues,” the report added.

However the Waxman-Markey climate bill proposes that coal-dependent utilities get a large amount of allowances free-of-charge in the earlier years of a future cap-and-trade scheme, cushioning them from the full impact of carbon pricing.