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Greenhouse Gases

Social cost of carbon dioxide may be much more than emitter’s profit

New study calculates impact of large carbon dioxide emitters on environment

by Leigh Krietsch Boerner
August 25, 2023 | A version of this story appeared in Volume 101, Issue 28


As of now, US rules requiring companies to report their greenhouse gas emissions are spotty and uneven. But if the US Securities and Exchange Commission (SEC) has its way, that will change soon.


of profits before taxes

Monetary equivalent of corporate carbon damage produced by the worst greenhouse gas–emitting industries

In March 2022, the SEC proposed a rule that would require publicly traded companies to disclose, among other things, the amount of greenhouse gases they emit. If the rule is finalized, the information could have a huge impact on environmental policy, according to researchers from the University of Chicago and University of Mannheim (Science 2023, DOI: 10.1126/​science.add6815).

Greenhouse gas emissions impose hefty costs on society, the researchers say. Requiring companies to report their emissions publicly would give both the government and the public data to act upon and may cause the companies to voluntarily reduce their emissions.

In order to put a hard number to this pollution, the environmental economists Michael Greenstone, Christian Leuz, and Patricia Breuer calculated what they call corporate carbon damages, or “a measure of the total costs to society associated with corporate emissions.” On average, corporate carbon damages equate to 44% of a company’s profit before taxes.

“A key finding is that carbon damages per dollar of profits vary greatly across countries, across industries, and even across firms within a given industry,” Greenstone says in a press release.

Industries known for using large amounts of energy—such as utilities, materials, energy, and transportation—represent 89% of global corporate carbon damages. These four industries each produce damages equal to around 150% of their companies’ profits before taxes.

To calculate the corporate carbon damages, the researchers multiplied the equivalent of each company’s direct carbon dioxide emissions by the social cost of carbon. The social cost is the monetary value of the damages associated with the release of CO2 and is defined by the US Environmental Protection Agency as $190 per metric ton of CO2-equivalent emissions. Equivalent emissions are used to compare the global warming potential of greenhouses gases other than CO2.

The researchers used corporate greenhouse gas emission data for nearly 15,000 publicly traded companies worldwide. Since not all companies report their emissions, the team also used estimates from the analytics company S&P Global.

The researchers’ method of determining carbon damage would be very constructive as a part of regulatory disclosure requirements, says Archon Fung, public policy researcher at Harvard University’s Kennedy School of Government.

If the SEC passes the mandatory disclosure rule, the researchers say, companies pumping out high amounts of greenhouse gases could be shamed into reducing that number. If all companies reduced their emissions to the industry average of corporate carbon damages, overall greenhouse gas emissions would fall by 70%.

But it’s unclear when the SEC rule is going into effect. At the time of the proposal, the SEC had planned to publish the rule in December 2022. It later delayed the date to April 2023, then to October 2023. The SEC has not provided any more details on the timing. “We don’t comment or provide updates on the timing of regulatory actions,” an SEC spokesperson says in an email.


This article was updated on Sept. 27, 2023, to note that there are in fact US government rules requiring companies to report their greenhouse gas emissions. The original said there are no such rules.


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