Government announced increases in carbon pricing and their implications for corporate valuations
This report explores global corporate environmental costs, finding that unpriced carbon emissions represent a material risk to valuations. Analysing approximately 20,000 companies, it illustrates how projected carbon price increases in jurisdictions like Norway and Canada could significantly erode enterprise values, especially within the aviation and maritime sectors.
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OVERVIEW
EcoMap’s analysis identifies a fundamental shift in corporate finance: the cost of emissions is no longer merely an external societal challenge but has become a direct risk of material liability on corporate income statements and balance sheets. Global corporate emissions are estimated to place more than 20% of profit at risk, representing a total implied societal cost of approximately $14.5 trillion annually across all scopes. Of this, Scope 1 emissions alone account for $3.2 trillion in direct, attributable environmental costs, which represents 22.2% of EBITDA for profitable companies.
Introduction
While some governments have reduced their climate ambitions, others are rapidly expanding carbon pricing and taxation. According to the World Bank, 80 carbon pricing systems are now in place globally, generating over $100 billion in 2024. This trend is accelerating, with large middle-income economies like China expanding their national Emissions Trading Schemes (ETS). Furthermore, the implementation of the EU Carbon Border Adjustment Mechanism (CBAM) is encouraging other nations, such as the UK, Canada, and Australia, to explore similar systems to ensure their producers are not unfairly penalised.
Methodology: from emissions to financial cost
EcoMap utilises company-level greenhouse gas (GHG) data to quantify environmental risk, classifying emissions according to the GHG Protocol (Scopes 1, 2, and 3). Raw data is sourced from MSCI Solutions LLC and monetised using environmental cost factors from the International Foundation for Valuing Impacts (IFVI). The Social Cost of Carbon (SCC) is calculated using advanced Integrated Assessment Models, including the Greenhouse Gas Impact Value Estimator (GIVE) and the Data-driven Spatial Climate Impact Model (DSCIM), which assess damages to human health, agricultural productivity, and the built environment.
Carbon tax alignment and regulatory risk for leading nations
Jurisdictions including Norway, Canada, France, and Sweden are moving their tax trajectories closer to modelled societal cost estimates. Norway has legislated an increase in its national carbon tax from approximately $118 per ton CO2e in 2024 to $241 per ton by 2030, a rate expected to internalise 91% of the environmental cost associated with Scope 1 emissions. Similarly, Canada’s federal price is scheduled to rise by 112% to $121 per ton by 2030, while France targets an increase to $115 per ton.
How carbon costs affect financial statements under IFRS
Under IFRS-aligned accounting, carbon costs are increasingly treated as operating expenses (OPEX), directly reducing both EBITDA and EBIT. The International Accounting Standards Board (IASB) has finalised guidance requiring companies in 169 jurisdictions to reflect climate impacts directly in profit and loss accounts. This “financial rewiring” ensures that climate-related losses are treated as material financial events rather than peripheral disclosures. Furthermore, the ISSB’s IFRS S2 standards now require companies to quantify and disclose the financial impacts of climate-related risks on their cash flows.
Case study: Norway’s emerging internalisation of Scope 1 liabilities through carbon taxation
Norway’s unified carbon pricing framework serves as a global policy benchmark by incorporating both ETS-covered and non-ETS industries. For industries with high direct emissions, the implications are severe; for instance, aviation companies could see carbon tax obligations equivalent to 20% of their revenue by 2030, up from 13% in 2024. In the maritime transport sector, carbon costs are projected to double on average, rising from approximately 9.4% to over 19% of revenue. The oil and gas industry, while seeing costs increase, may find its higher profitability allows it to absorb these costs more readily than lower-margin sectors.
Valuation at risk: the impact of internalising carbon costs
To estimate valuation risks, the report applies an “Adjusted EBITDA” methodology, subtracting the monetised societal cost of a company’s direct emissions from its reported EBITDA. This isolates the impact of unpriced carbon and provides a “Climate Risk Adjusted Enterprise Value”. The analysis reveals that fully pricing in Scope 1 emissions could reduce enterprise values in the aviation sector by 26.9% and in maritime transport by 29.3%. The greatest risk is found where high Scope 1 emissions coincide with low profit margins.
Carbon liability as a core transition risk
The report defines the “decoupling rate” as a metric for transition risk, representing the annualised change in environmental cost relative to revenue growth. A global analysis of nearly 20,000 companies shows a concerning transition risk rate of -5.3%, indicating that environmental costs are rising faster than revenues. This suggests a deterioration in environmental cost efficiency per unit of revenue. The construction sector exhibits a particularly high negative decoupling rate of 12.94%, making it acutely vulnerable to carbon pricing shocks.
Strategic implications for business and investment
The internalisation of carbon costs is shifting from an externality to a line-item expense, impacting access to capital. High-emission companies already face a “carbon premium” on debt, paying an average of 14 basis points more in borrowing costs than their low-emission peers. To prepare for the future, firms are recommended to embed environmental cost considerations into their governance and strategy, using shadow carbon pricing aligned with evolving reporting expectations to avoid asset stranding or overvaluation during mergers and acquisitions.