HOW CARBON PRICING AFFECTS VALUE OF FIRMS: THE CASE OF OIL AND GAS COMPANIES
Keywords:
carbon price, scenarios, stranded assets, valuationAbstract
Financial literature has only recently become interested in the consequences of climate change on company values. Our article contributes to the literature by concentrating on the question of the impact of carbon pricing on company valuation. We show that the information on carbon emitted by companies is relatively limited and derived from multiple sources. Based on carbon price development scenarios prepared by international organisations and companies, we present a range of simulations that show the major impact of the ‘carbon’ variable when valuing companies in the oil and gas sector. We conclude that the quality of information on firms’ emissions is now a key issue for their assessment.
JEL Classification: G10, G11, P18.
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