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The price of carbon risk: Evidence from the Kyoto Protocol ratification

Author

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  • Nguyen, Justin Hung
  • Truong, Cameron
  • Zhang, Bohui

Abstract

We examine the price of carbon risk using the Kyoto Protocol ratification (hereafter KPR) committed by the Australian government in December 2007. We find that, in the post-KPR period, firms with high carbon emissions experience a substantial increase in the costs of debt and equity relative to those firms with a lower carbon footprint. Moreover, after the KPR, carbon emitters are less likely to be financed by major banks and more likely to borrow from new lenders. When conducting seasoned equity offerings, carbon emitters are more willing to use underwriting services rather than rights offerings.

Suggested Citation

  • Nguyen, Justin Hung & Truong, Cameron & Zhang, Bohui, 2025. "The price of carbon risk: Evidence from the Kyoto Protocol ratification," Journal of Environmental Economics and Management, Elsevier, vol. 130(C).
    • Handle: RePEc:eee:jeeman:v:130:y:2025:i:c:s0095069625000026
    DOI: 10.1016/j.jeem.2025.103118
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    Keywords

    Carbon risk; Cost of debt; Cost of equity; Cash flow risk;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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