Responding to the EU Emissions Trading Scheme: an empirical analysis of corporate carbon disclosure strategy

The purpose of this paper is to explore how companies that hold carbon trading accounts under European Union Emissions Trading Scheme (EU ETS) respond to the climate change by using disclosures on carbon emissions as a means to generate legitimacy compared to others. The study is based on disclosures made in annual reports and stand-alone sustainability reports of UK listed companies from 2001- 2012. The study uses content analysis to capture both the quality and volume of the carbon disclosures. The results show that there is a significant increase in both the quality and volume of the carbon disclosures after the launch of EU ETS. Companies with carbon trading accounts provide greater detailed disclosures as compared to the others without an account. We also find that company size is positively correlated with the disclosures while the association with the industry produces an inconclusive result.

Carbon trading for phosphorus gain: the balance between rhizosphere carboxylates and arbuscular mycorrhizal symbiosis in plant phosphorus acquisition

Two key plant adaptations for phosphorus (P) acquisition are carboxylate exudation into the rhizosphere and mycorrhizal symbioses. These target different soil P resources, presumably with different plant carbon costs. We examined the effect of inoculation with arbuscular mycorrhizal fungi (AMF) on amount of rhizosphere carboxylates and plant P uptake for 10 species of low-P adapted Kennedia grown for 23 weeks in low-P sand. Inoculation decreased carboxylates in some species (up to 50%), decreased plant dry weight (21%) and increased plant P content (23%). There was a positive logarithmic relationship between plant P content and the amount of rhizosphere citric acid for inoculated and uninoculated plants. Causality was indicated by experiments using sand where little citric acid was lost from the soil solution over 2 h and citric acid at low concentrations desorbed P into the soil solution. Senesced leaf P concentration was often low and P-resorption efficiencies reached >90%. In conclusion, we propose that mycorrhizally mediated resource partitioning occurred because inoculation reduced rhizosphere carboxylates, but increased plant P uptake. Hence, presumably, the proportion of plant P acquired from strongly sorbed sources decreased with inoculation, while the proportion from labile inorganic P increased. Implications for plant fitness under field conditions now require investigation.

An integrated assessment of carbon dioxide capture and storage in the UK

Geological carbon dioxide storage (CCS) has the potential to make a significant contribution to the decarbonisation of the UK. Amid concerns over maintaining security, and hence diversity, of supply, CCS could allow the continued use of coal, oil and gas whilst avoiding the CO2 emissions currently associated with fossil fuel use. This project has explored some of the geological, environmental, technical, economic and social implications of this technology. The UK is well placed to exploit CCS with a large offshore storage capacity, both in disused oil and gas fields and saline aquifers. This capacity should be sufficient to store CO2 from the power sector (at current levels) for a least one century, using well understood and therefore likely to be lower-risk, depleted hydrocarbon fields and contained parts of aquifers. It is very difficult to produce reliable estimates of the (potentially much larger) storage capacity of the less well understood geological reservoirs such as non-confined parts of aquifers. With the majority of its large coal fired power stations due to be retired during the next 15 to 20 years, the UK is at a natural decision point with respect to the future of power generation from coal; the existence of both national reserves and the infrastructure for receiving imported coal makes clean coal technology a realistic option. The notion of CCS as a ‘bridging’ or ‘stop-gap’ technology (i.e. whilst we develop ‘genuinely’ sustainable renewable energy technologies) needs to be examined somewhat critically, especially given the scale of global coal reserves. If CCS plant is built, then it is likely that technological innovation will bring down the costs of CO2 capture, such that it could become increasingly attractive. As with any capitalintensive option, there is a danger of becoming ‘locked-in’ to a CCS system. The costs of CCS in our model for UK power stations in the East Midlands and Yorkshire to reservoirs in the North Sea are between £25 and £60 per tonne of CO2 captured, transported and stored. This is between about 2 and 4 times the current traded price of a tonne of CO2 in the EU Emissions Trading Scheme. In addition to the technical and economic requirements of the CCS technology, it should also be socially and environmentally acceptable. Our research has shown that, given an acceptance of the severity and urgency of addressing climate change, CCS is viewed favourably by members of the public, provided it is adopted within a portfolio of other measures. The most commonly voiced concern from the public is that of leakage and this remains perhaps the greatest uncertainty with CCS. It is not possible to make general statements concerning storage security; assessments must be site specific. The impacts of any potential leakage are also somewhat uncertain but should be balanced against the deleterious effects of increased acidification in the oceans due to uptake of elevated atmospheric CO2 that have already been observed. Provided adequate long term monitoring can be ensured, any leakage of CO2 from a storage site is likely to have minimal localised impacts as long as leaks are rapidly repaired. A regulatory framework for CCS will need to include risk assessment of potential environmental and health and safety impacts, accounting and monitoring and liability for the long term. In summary, although there remain uncertainties to be resolved through research and demonstration projects, our assessment demonstrates that CCS holds great potential for significant cuts in CO2 emissions as we develop long term alternatives to fossil fuel use. CCS can contribute to reducing emissions of CO2 into the atmosphere in the near term (i.e. peak-shaving the future atmospheric concentration of CO2), with the potential to continue to deliver significant CO2 reductions over the long term.

Governing the clean development mechanism: global rhetoric versus local realities in carbon sequestration projects

Global agreements have proliferated in the past ten years. One of these is the Kyoto Protocol, which contains provisions for emissions reductions by trading carbon through the Clean Development Mechanism (CDM). The CDM is a market-based instrument that allows companies in Annex I countries to offset their greenhouse gas emissions through energy and tree offset projects in the global South. I set out to examine the governance challenges posed by the institutional design of carbon sequestration projects under the CDM. I examine three global narratives associated with the design of CDM forest projects, specifically North – South knowledge politics, green developmentalism, and community participation, and subsequently assess how these narratives match with local practices in two projects in Latin America. Findings suggest that governance problems are operating at multiple levels and that the rhetoric of global carbon actors often asserts these schemes in one light, while the rhetoric of those who are immediately involved locally may be different. I also stress the alarmist’s discourse that blames local people for the problems of environmental change. The case studies illustrate the need for vertical communication and interaction and nested governance arrangements as well as horizontal arrangements. I conclude that the global framing of forests as offsets requires better integration of local relationships to forests and their management and more effective institutions at multiple levels to link the very local to the very large scale when dealing with carbon sequestration in the CDM.

A longitudinal study of carbon disclosure strategy: evidence from utility, energy and mining industries in the UK

The paper investigates how energy-intensive industries respond to the recent government-led carbon emission schemes through the content analysis of 306 annual and standalone reports of 25 UK listed companies from 2004 to 2012. This period of reporting captures the trend and development of corporate disclosures on carbon emissions after the launch of EU Emissions Trading Schemes (ETS) and Climate Change Act (CCA) 2008. It is found that in corresponding to strategic legitimacy theory, there is an increase in both the quality and quantity of carbon disclosures as a response to these initiatives. However, the change is gradual, which reflects in the achievement of peak disclosure period two years after the launch. It indicates that the new legislations have a lasting impact on the discourses rather than an immediate legitimacy threat from the perspective of institutional legitimacy theory. The results also show that carbon disclosures are an institutionalised practice as companies in the same industries and/or with same carbon trading account status appear to imitate and adopt the industry’s ‘best practice’ disclosure strategy to maintain legitimacy. The trend analysis suggests that the overall disclosure practice is still in its infant stage, especially in the reporting of quantitative and monetary items. The paper contributes to the social and environmental accounting literature by adopting both strategic and institutional view of legitimacy, which explains why carbon disclosures evolve in a specific way to meet the expectation of various stakeholders.

Progress report on longitudinal and cross-sectional study of carbon disclosure strategies: evidence from UK listed companies

Global warming has attracted attention from all over the world and led to the concern about carbon emission. Kyoto Protocol, as the first major international regulatory emission trading scheme, was introduced in 1997 and outlined the strategies for reducing carbon emission (Ratnatunga et al., 2011). As the increased interest in carbon reduction the Protocol came into force in 2005, currently there are already 191 nations ratifying the Protocol(UNFCCC, 2012). Under the cap-and-trade schemes, each company has its carbon emission target. When company’s carbon emission exceeds the target the company will either face fines or buy emission allowance from other companies. Thus unlike most of the other social and environmental issues carbon emission could trigger cost for companies in introducing low-emission equipment and systems and also emission allowance cost when they emit more than their targets. Despite the importance of carbon emission to companies, carbon emission reporting is still operating under unregulated environment and companies are only required to disclose when it is material either in value or in substances (Miller, 2005, Deegan and Rankin, 1997). Even though there is still an increase in the volume of carbon emission disclosures in company’s financial reports and stand-alone social and environmental reports to show their concern of the environment and also their social responsibility (Peters and Romi, 2009), the motivations behind corporate carbon emission disclosures and whether carbon disclosures have impact on corporate environmental reputation and financial performance have not yet to explore. The problems with carbon emission lie on both the financial side and non-financial side of corporate governance. On one hand corporate needs to spend money in reducing carbon emission or paying penalties when they emit more than allowed. On the other hand as the public are more interested in environmental issues than before carbon emission could also impact on the image of corporate regarding to its environmental performance. The importance of carbon emission issue are beginning to be recognized by companies from different industries as one of the critical issues in supply chain management (Lee, 2011) and 80% of companies analysed are facing carbon risks resulting from emissions in the companies’ supply chain as shown in a study conducted by the Investor Responsibility Research Centre Institute for Corporate Responsibility (IRRCI) and over 80% of the companies analysed found that the majority of greenhouse gas (GHG) emission are from electricity and other direct suppliers (Trucost, 2009). The review of extant literature shows the increased importance of carbon emission issues and the gap in the study of carbon reporting and disclosures and also the study which links corporate environmental reputation and corporate financial performance with carbon reporting (Lohmann, 2009a, Ratnatunga and Balachandran, 2009, Bebbington and Larrinaga-Gonzalez, 2008). This study would focus on investigating the current status of UK carbon emission disclosures, the determinant factors of corporate carbon disclosure, and the relationship between carbon emission disclosures and corporate environmental reputation and financial performance of UK listed companies from 2004-2012 and explore the explanatory power of classical disclosure theories.

What is Carbon? Conceptualising carbon and capabilities in the context of community sequestration projects in the global South

Carbon has been described as a ‘surreal commodity’. Whilst carbon trading, storage, sequestration and emissions have become a part of the contemporary climate lexicon, how carbon is understood, valued and interpreted by actors responsible for implementing carbon sequestration projects is still unclear. In this review paper, we are concerned with how carbon has come to take on a range of meanings, and in particular, we appraise what is known about the situated meanings that people involved in delivering, and participating in, carbon sequestration projects in the global South assign to this complex element. Whilst there has been some reflection on the new meanings conferred on carbon via the neoliberal processes of marketisation, and how these processes interact with historical and contemporary narratives of environmental change, less is known about how these meanings are (re)produced and (re)interpreted locally. We review how carbon has been defined both as a chemical element and as a tradable, marketable commodity, and discuss the implications these global meanings might have for situated understandings, particularly linked to climate change narratives, amongst communities in the global South. We consider how the concept of carbon capabilities, alongside theoretical notions of networks, assemblages and local knowledges of the environment and nature, might be useful in beginning to understand how communities engage with abstract notions of carbon. We discuss the implications of specific values attributed to carbon, and therefore to different ecologies, for wider conceptualisations of how nature is valued, and climate is understood, and particularly how this may impact on community interactions with carbon sequestration projects. Knowing more about how people understand, value and know carbon allows policies to be better informed and practices more effectively targeted at engaging local populations meaningfully in carbon-related projects.

The financial and environmental performance of firms exposed to the EU Emissions Trading Scheme

This thesis is an empirical-based study of the European Union’s Emissions Trading Scheme (EU ETS) and its implications in terms of corporate environmental and financial performance. The novelty of this study includes the extended scope of the data coverage, as most previous studies have examined only the power sector. The use of verified emissions data of ETS-regulated firms as the environmental compliance measure and as the potential differentiating criteria that concern the valuation of EU ETS-exposed firms in the stock market is also an original aspect of this study. The study begins in Chapter 2 by introducing the background information on the emission trading system (ETS), which focuses on (i) the adoption of ETS as an environmental management instrument and (ii) the adoption of ETS by the European Union as one of its central climate policies. Chapter 3 surveys four databases that provide carbon emissions data in order to determine the most suitable source of the data to be used in the later empirical chapters. The first empirical chapter, which is also Chapter 4 of this thesis, investigates the determinants of the emissions compliance performance of the EU ETS-exposed firms through constructing the best possible performance ratio from verified emissions data and self-configuring models for a panel regression analysis. Chapter 5 examines the impacts on the EU ETS-exposed firms in terms of their equity valuation with customised portfolios and multi-factor market models. The research design takes into account the emissions allowance (EUA) price as an additional factor, as it has the most direct association with the EU ETS to control for the exposure. The final empirical Chapter 6 takes the investigation one step further, by specifically testing the degree of ETS exposure facing different sectors with sector-based portfolios and an extended multi-factor market model. The findings from the emissions performance ratio analysis show that the business model of firms significantly influences emissions compliance, as the capital intensity has a positive association with the increasing emissions-to-emissions cap ratio. Furthermore, different sectors show different degrees of sensitivity towards the determining factors. The production factor influences the performance ratio of the Utilities sector, but not the Energy or Materials sectors. The results show that the capital intensity has a more profound influence on the utilities sector than on the materials sector. With regard to the financial performance impact, ETS-exposed firms as aggregate portfolios experienced a substantial underperformance during the 2001–2004 period, but not in the operating period of 2005–2011. The results of the sector-based portfolios show again the differentiating effect of the EU ETS on sectors, as one sector is priced indifferently against its benchmark, three sectors see a constant underperformance, and three sectors have altered outcomes.

Carbon (C-13) and nitrogen (N-15) translocation in a maize-Striga hermonthica association

The translocation of C and N in a maize-Striga hermonthica association was investigated at three rates of nitrogen application in a glasshouse experiment. The objectives were to measure the transfer of C and N from maize to S. hermonthica and to determine whether the amount of N in the growing medium affected the proportions of C and N transferred. Young plants of maize were labelled in a (CO2)-C-13 atmosphere and leaf tips were immersed in ((NH4)-N-15)(2)SO4 Solution. The Striga x N interaction was not significant for any of the responses measured. Total dry matter for infected maize was significantly smaller than for uninfected maize from 43 to 99 days after planting, but N application increased total dry matter at all sampling times. Infected maize plants partitioned 39-45 % of their total dry matter to the roots compared with 28-31 % for Uninfected maize. Dry matter of S. hermonthica was not affected by the rate of N applied. S. hermonthica derived 100 % of its carbon from maize before emergence, decreasing to 22-59 % thereafter; the corresponding values for nitrogen were up to 59 % pre-emergence and Lip to 100 % after emergence. The relative proportions of nitrogen depleted from the host (up to 10 %) were greater than those of carbon (maximum 1.2 %) at all times of sampling after emergence of the parasite. The results show that the parasite was more dependent on the host for nitrogen than for carbon.

Predicted soil organic carbon stocks and changes in Jordan between 2000 and 2030 made using the GEFSOC modelling system

Estimates of soil organic carbon (SOC) stocks and changes under different land use systems can help determine vulnerability to land degradation. Such information is important for countries in and areas with high susceptibility to desertification. SOC stocks, and predicted changes between 2000 and 2030, were determined at the national scale for Jordan using The Global Environment Facility Soil Organic Carbon (GEFSOC) Modelling System. For the purpose of this study, Jordan was divided into three natural regions (The Jordan Valley, the Uplands and the Badia) and three developmental regions (North, Middle and South). Based on this division, Jordan was divided into five zones (based on the dominant land use): the Jordan Valley, the North Uplands, the Middle Uplands, the South Uplands and the Badia. This information was merged using GIS, along with a map of rainfall isohyets, to produce a map with 498 polygons. Each of these was given a unique ID, a land management unit identifier and was characterized in terms of its dominant soil type. Historical land use data, current land use and future land use change scenarios were also assembled, forming major inputs of the modelling system. The GEFSOC Modelling System was then run to produce C stocks in Jordan for the years 1990, 2000 and 2030. The results were compared with conventional methods of estimating carbon stocks, such as the mapping based SOTER method. The results of these comparisons showed that the model runs are acceptable, taking into consideration the limited availability of long-term experimental soil data that can be used to validate them. The main findings of this research show that between 2000 and 2030, SOC may increase in heavily used areas under irrigation and will likely decrease in grazed rangelands that cover most of Jordan giving an overall decrease in total SOC over time if the land is indeed used under the estimated forms of land use. (C) 2007 Elsevier B.V. All rights reserved.

Cropping systems, carbon sequestration and erosion in Brazil, a review

Soils represent a large carbon pool, approximately 1500 Gt, which is equivalent to almost three times the quantity stored in terrestrial biomass and twice the amount stored in the atmosphere. Any modification of land use or land management can induce variations in soil carbon stocks, even in agricultural systems that are perceived to be in a steady state. Tillage practices often induce soil aerobic conditions that are favourable to microbial activity and may lead to a degradation of soil structure. As a result, mineralisation of soil organic matter increases in the long term. The adoption of no-tillage systems and the maintenance of a permanent vegetation cover using Direct seeding Mulch-based Cropping system or DMC, may increase carbon levels in the topsoil. In Brazil, no-tillage practices (mainly DMC), were introduced approximately 30 years ago in the south in the Parana state, primarily as a means of reducing erosion. Subsequently, research has begun to study the management of the crop waste products and their effects on soil fertility, either in terms of phosphorus management, as a means of controlling soil acidity, or determining how manures can be applied in a more localised manner. The spread of no-till in Brazil has involved a large amount of extension work. The area under no-tillage is still increasing in the centre and north of the country and currently occupies ca. 20 million hectares, covering a diversity of environmental conditions, cropping systems and management practices. Most studies of Brazilian soils give rates of carbon storage in the top 40 cm of the soil of 0.4 to 1.7 t C ha(-1) per year, with the highest rates in the Cerrado region. However, caution must be taken when analysing DMC systems in terms of carbon sequestration. Comparisons should include changes in trace gas fluxes and should not be limited to a consideration of carbon storage in the soil alone if the full implications for global warming are to be assessed.