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Manufacturers: profits at risk from carbon costs
04 July 2008
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Key findings include:
- Companies face profit risks from carbon costs passed on through electricity prices.
- Electricity prices could rise by 50% in carbon-intensive countries such as China and India.
- Trucost’s analysis of Alcoa shows that carbon emissions trading or tariffs could cost $673 million or over 30% of its profits annually.
- Rio Tinto and BHP could see profits fall almost 11% if they pay for carbon costs through electricity suppliers and are unable to pass them on.
Extract
Companies in all sectors are likely to be exposed to rising electricity prices as emission trading schemes are rolled out in regions around the world. Profits of carbon-intensive electricity users could be significantly affected. Trucost has analysed how carbon costs from purchased electricity would affect manufacturers in different industries and countries.
Why did Trucost carry out the research?
Manufacturers that purchase electricity in carbon-intensive countries face significant carbon costs if emissions trading or border taxes are introduced. To reduce exposure to indirect carbon costs, investors need information about the risk to manufacturers that use large amounts of carbon-intensive electricity.
Companies and their investors that do not consider carbon risks embedded in electricity purchased by energy-intensive companies may be exposed to large carbon costs under national, regional or global emission trading schemes. Trucost’s analysis of companies’ electricity consumption can help identify potential carbon risk exposures.
Report image: Electricity price rises
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