Carbon pricing and revenue growth valuation risk exposure

Two research questions are examined in this study: First, whether carbon prices affect valuation risk exposure to revenue growth? Second, do carbon emission reductions affect the link between carbon pricing and revenue growth valuation risk? The data used in the study is drawn from secondary sources like the world bank portal and carbon pricing database for the sample period 2016-2022. This study uses different statistical techniques for addressing the research questions raised. These techniques include Univariate analysis, regression analysis- OLS, Quantile regression and System Dynamic GMM regression for robustness checks. This study uses propensity score matching technique for verifying if the sample selection bias affects the results. Pre-diagnostic tests for normality include: Shapiro-Wilk Test, Shapiro-Francia Test, Skewness/Kurtosis Test. The study's findings show that the increase in carbon costs decreases revenue growth thereby increases the valuation risk exposure. A one percent increase in carbon price considerably raises the valuation risk of export trade revenue growth. According to this analysis, the relationship between carbon pricing and revenue growth valuation risk is moderated by lower carbon emissions. This study shows how carbon pricing affects plastic-intensive companies' revenue growth and policy and regulation. It shows how lower carbon emissions affect carbon pricing and income growth. Revenue growth will be steady for companies that reduce emissions and combat rising costs of carbon. Carbon-intensive companies risk losing income due to market and regulatory pressures. • This study provides insights on carbon pricing and valuation risk exposure. • This study uses a novel approach for estimating carbon pricing based on value (dollar), volume (consumption of plastics) and emissions scaling. • This study provides insights on a crucial topic that focuses on balancing environmental concerns with economic growth which remains a major challenge for the transition to net-zero emissions. • An ambitious and effective climate policy requires greenhouse gas pricing. Carbon taxes are among the most effective market-based devices for reducing greenhouse gas emissions; • This study finds that the higher quantiles of revenue growth experience the most negative consequences of the carbon costs as compared to the lower quantiles 0.25 and 0.50. • Furthermore, companies that actively strive to reduce emissions can offset the increasing costs associated with carbon, resulting in constant revenue growth. • Firms that continue to be carbon-intensive are at risk of losing income because of regulatory and market pressures. • This study has relevance to the SDGs 9, 12 & 13.