A study published by academics at the University of Chicago has found that corporate emissions are undermining prosperity.
The damage caused when publicly traded companies emit greenhouse gases is equivalent — on average — to about 44% of operating profits, according to an analysis by Michael Greenstone and Christian Leuz of the University of Chicago, and Patricia Breuer of the University of Mannheim.
The remedy is to impose mandatory disclosure requirements that would reveal to financial markets just how much is at stake, the authors wrote. Their conclusion comes as the US Securities and Exchange Commission struggles to push through its climate disclosure rule, in the face of intense corporate lobbying against the measure.
“In too many parts of the world, it is free to emit the greenhouse gases that are causing climate change that is now becoming disruptive,” Greenstone, the Milton Friedman Distinguished Service Professor in Economics and director of the Energy Policy Institute at the University of Chicago, said in an email.
“Disclosure is inexpensive and has the potential to help set off reductions in greenhouse gas emissions that benefit us all,” he said.
The fact that such a message should come from the University of Chicago, where Friedman nurtured a generation of libertarian economists whose views would collectively be known as the Chicago School, shows how far the debate around climate regulations has come.
“Disclosure of emissions data is vital to holding firms accountable for their emissions,” Leuz, who’s the Charles F. Pohl Distinguished Service Professor of Accounting and Finance at the University of Chicago’s Booth School of Business, said in a statement.
The report comes as the damage wrought by climate change dominates news headlines, with wildfires, floods and other weather extremes terrorizing populations and habitats across the globe. At the same time, direct and indirect subsidies for fossil fuels hit a record $7 trillion last year, or more than 7% of global gross domestic product, according to a fresh analysis the International Monetary Fund.