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Milton Friedman's Alma Mater Reveals Enormous Costs of CO2 Emissions

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The High Cost of CO2 Emissions Exposed by Milton Friedman's Alma Mater

A study conducted by academics at the University of Chicago has revealed that corporate emissions are significantly impacting prosperity. The analysis, led by Michael Greenstone and Christian Leuz of the University of Chicago, along with Patricia Breuer of the University of Mannheim, found that the damage caused by greenhouse gas emissions from publicly traded companies is equivalent to about 44% of their operating profits on average. The authors argue that mandatory disclosure requirements should be imposed to reveal the true extent of the stakes involved. This comes at a time when the US Securities and Exchange Commission is facing resistance from corporate lobbying as it tries to implement its climate disclosure rule. The study highlights the urgent need to address the costs associated with emissions and the importance of transparency in holding firms accountable for their environmental impact. It also emphasizes the potential for reductions in greenhouse gas emissions through disclosure. The University of Chicago, known for its association with Milton Friedman and the Chicago School of Economics, demonstrates the shifting landscape of the climate regulation debate. The research examined emissions data from nearly 15,000 publicly traded companies, representing about 80% of the global market. By multiplying companies' CO2 footprint by the social cost of carbon (SCC), the study estimated the damage caused by emissions. Variations were observed across countries, with the US having an average carbon damage of about 26% of corporate profits, compared to approximately 130% in Russia. The study also identified sectors such as utilities, energy, materials, and transportation as accounting for 89% of global carbon damage. Overall, the study underscores the importance of addressing emissions and implementing mandatory disclosure to increase credibility and accountability. It highlights the potential for significant reductions in emissions if the worst polluters take more substantial steps to address their environmental footprints.

Implications of CO2 Emissions Costs for New Businesses

The recent study from the University of Chicago revealing the significant impact of corporate emissions on prosperity sends a stark warning to new businesses. With the damage caused by greenhouse gas emissions from publicly traded companies equating to about 44% of their operating profits on average, the financial implications of environmental negligence are clear.

Transparency and Accountability

The call for mandatory disclosure requirements underlines the importance of transparency in business operations. For new businesses, establishing a culture of transparency from the outset can enhance credibility and accountability, particularly in relation to environmental impact.

Addressing Emissions

The study also emphasizes the potential for significant reductions in greenhouse gas emissions through proactive measures. For new businesses, this presents an opportunity to integrate sustainable practices from the beginning, potentially reducing future costs and contributing to environmental preservation.
The Changing Climate Regulation Landscape
The association of this study with the University of Chicago, known for its association with Milton Friedman and the Chicago School of Economics, underscores the shifting landscape of climate regulation. New businesses must be prepared to navigate this evolving terrain, balancing profitability with environmental responsibility. In conclusion, the high cost of CO2 emissions presents both challenges and opportunities for new businesses. By embracing transparency, addressing emissions, and navigating the changing regulatory landscape, new businesses can position themselves for sustainable success.
Story First Published at: https://financialpost.com/pmn/business-pmn/milton-friedmans-alma-mater-exposes-huge-cost-of-co2-emissions
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