Carbon emissions bill should prompt new evaluation of companies as investments, study says

If proposed cap-and-trade legislation aimed at restricting corporate carbon emissions is passed, advisers and investors will have to re-evaluate companies on an individual basis, as the real-money effects of this law would vary dramatically from firm to firm, according a new research report. “We’re talking about $100 billion worth of costs that someone is bearing, and good corporate managements will see this as an opportunity to create a competitive advantage,” said Jon Lukomnik, program director at the IRRC Institute, a New York-based non-profit corporate research organization. The legislation currently moving through Congress, sponsored by chairman Henry A. Waxman of the Energy and Commerce Committee and chairman Edward J. Markey of the Energy and Environment Subcommittee, would license and regulate carbon emissions starting in 2012 will cut deeply, but not consistently, into corporate profit, according to the report released today entitled “Carbon Risks and Opportunities in The S&P 500.” In the carbon-intensive utility sector, for example, new costs related to the passage of the carbon emissions legislation would lower company earnings by anywhere from 1% to 102%. According to Mr. Lukomnik, if the 34 utility companies analyzed in the study were to pay for each metric ton of emissions, carbon costs would reduce their combined earnings by 45%. The onus will be on investors to determine the actual impact on a company’s bottom line, assuming the legislation passes in its current form, Mr. Lukomnik said. “Investors need to look at developing an analytical framework to calculate the costs, because some companies and investors could be caught off guard,” he said. “Right now two-thirds of the S&P 500 companies have inadequate greenhouse gas emissions disclosures.”