Impact of carbon emissions on total assets and operating costs: An analysis of the jse100 companies
Corporate Ownership and Control
Department of Finance, Banking and Risk Management, University of South Africa, P O Box 392, UNISA, 0003, South Africa
There is a definite concern in the rise of carbon emissions globally from traditional methods of production (Stern, 2008; IPCC, 2007). More so it is now widely acclaimed that by adopting production processes that reduce carbon emissions to low levels, companies will succeed in reducing their operating costs (Dietz et al, 2009; Sims et al, 2003). There has been limited study in investigating how the present state of companies' carbon emissions output is related to their operating costs and total assets. Therefore the study intends to establish the level of interactions between the carbon emissions, total assets and the operating costs they report annually. A panel data analysis was done on these three variables using a sample of the top 100 Johannesburg Stock Exchange (JSE) reporting companies in South Africa. The study utilized the data of companies that report their emissions to the Carbon Disclosure Project (CDP) annually and are the top 100 JSE Companies by market capitalization and categorized the CDP reporting companies into 7 industrials sectors. The 7 industrial sectors are Consumer Discretionary, Consumer Staples, Energy and Materials, Financials, Health Care, Industrials and IT and Telecoms. The results indicate that in the short run there is no strong relationship between carbon emissions output and operating costs. More so, the carbon emissions have a very weak and statistically insignificant relationship with total assets.