The Carbon Effect on Earnings, M&A

The Carbon Effect on Earnings, M&A - 7/6/2009

Home

Index of Filings

News and Press Releases

Filings

Decisions

Settlements

Litigation Activity Indices

Top Ten List

Annual/Quarterly Updates

Clearinghouse Research

Articles & Papers

Search

Related Sites

About Us

Local Rules

Sponsors

Register

_______________
Copyright © 2001
Stanford Law School

2009 News and Press Releases

SEARCH

News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

The Carbon Effect on Earnings, M&A, Proposed Energy Legislation Will Have Direct And Indirect Consequences On The Revenues, Profits, And M&A Transactions Of Heavy CO2 Emitters.
Marie Leone

CFO.com. July 6, 2009
_________________________________________________________________________

EXCERPT: The U.S. House of Representatives narrowly passed a new carbon cap and trade bill last week, bringing American businesses one step closer to a mandatory lid on carbon dioxide emissions — the air pollutant cited as being most responsible for global climate change. The legislation, sponsored by Reps. Henry Waxman (D-Cal.) and Edward Markey (D-Mass.), requires steady reductions in CO2 emissions starting in 2012, with a first goal of capping so-called greenhouse gas emissions at 2005 levels. The bill — known as the American Clean Energy and Security Act of 2009 — also stipulates that by 2050, greenhouse gas emissions from power plants and factories not exceed 17% of the 2005 levels. Now making its way to the Senate, the legislation also sets a national standard for renewable electricity. Observers expect the Waxman-Markey bill, if it becomes law, to affect companies in several direct and indirect ways. Compliance costs, for example, would hit corporate cash flows and earnings, while CO2 allowance trading would launch a new asset class that could be traded on exchanges. Financial statement disclosures, and attendant reporting, would also change, eventually; so far, though, neither American nor international accounting-standards setters have pushed through any new rules. Despite the uncertainty surrounding the pending legislation and accounting rules, some observers have been sharpening their pencils and calculating both the quantitative and qualitative impacts of carbon costs on companies. For instance, environmental benchmarking firm TruCost shows that the drop in earnings — before interest, tax, depreciation, and amortization — would vary widely for carbon-intensive companies in the S&P 500, from a nominal 1% to a whopping 117%. Direct emitters, including utility, oil and gas, industrial goods, and basic resources companies, would feel the tightest squeeze, with the potential 117% hit to EBITDA.

Back to News page | Back to Archived News 2009 page | Back to Top

�