Did Australia's brief period of carbon pricing impact corporate environmental, financial or social performance?

Abstract

This study utilizes transaction cost and legitimacy theories to examine whether a carbon tax affects listed companies' environmental, financial and social performance within the context of Australia's National Greenhouse Energy Reporting (NGER) Act. We use a base sample of 346 listed company-year observations for 2012–2017 and employ the System Generalized Method of Moments (GMM) to deal with bias arising from endogenous explanatory variables in our analysis. We find that the short period of implementation of a carbon tax in Australia was not successful in improving the carbon emissions of the high polluters subject to the tax in our sample. High polluters subject to the tax experienced a positive impact on financial performance and social performance. However, many entities beyond listed companies were subject to the tax, and the period of the tax saw a reduction in total emissions. We conjecture that industry assistance and free carbon credits granted to companies explain these results.

Keywords

• Carbon tax
• Carbon liable
• Environmental performance
• Financial performance
• Social performance