Carbon Burden

Abstract

We compute the U.S. corporate sector's "carbon burden"---the present value of social costs of future carbon emissions.   Our baseline estimate is 131% of total corporate equity value.  Meeting the Paris Agreement goals would reduce the burden by roughly one-fourth, but emissions forecasts and firms' own targets fall short of that reduction.  13% of firms have carbon burdens exceeding their market capitalizations, even with indirect emissions excluded. Firms with higher carbon burdens have higher costs of capital, even after controlling for past emissions.  Only a small fraction of the burden is priced through that channel, however.

Keywords: carbon emissions, carbon burden, externality

JEL Classification: D62, G30, G38, Q51, Q54