Climate change policies such as carbon taxes and emissions trading schemes are being developed and implemented in ways which fundamentally transform the profitability of industries and businesses. While mandatory reporting of greenhouse gas emissions by individual Australian companies is now largely standardised, the financial implications of emissions trading and other forms of climate change policy are poorly understood. This paper aims to discuss these issues.
A literature review was conducted of financial analyst research on this issue and determined that this poor understanding is the result of either insufficient information being available to adequately evaluate the risk to business or a lack of understanding about how carbon policies will impact on business.
This paper proposes a “checklist” for evaluation of the risks and opportunities created by pricing carbon to address this analytical chasm. Most importantly, like any significant tax reform, the paper concludes that it is impossible to create simple metrics that can be used across all industries and companies.
The paper outlines, for the first time, a checklist for analysis of the impacts of carbon pricing on Australian businesses.
