Integrating low-carbon goals into petroleum enterprises: tax reforms and financial strategies

This study will look at how financial, environmental and policy related factors will determine the valuation of the firms in the petroleum industry in terms of Tobin’s Q. Based on a fixed-effects panel model of 142 firms in the petroleum industry based in 2010–2023, we examine the impact of carbon intensity, emission intensity, corporate leverage, profitability, retained earnings, revenue growth, and regulatory mechanisms. The findings indicate that environmental inefficiency, especially the intensity of emission and carbon intensity, significantly decreases the market valuation, with a 1 standard deviation change in the intensity of emission leading to about a 50–53% decrease in the Q of Tobin among samples. The operating profit margin is among the most robust positive valuation drivers, whereas leverage and dividend payouts have a consistent positive influence. The retained earnings represent few economic implications, and revenue growth portrays few yet statistically strong effects, which imply that financial fundamentals are important but have a small influence when compared with the environmental performance. The asymmetric effects are realized in the policy variables: in an environment where the emission trading system (ETS) operates, firms attract stricter valuation punishments on the carbon- and energy-related inefficiency, and investor sensitivity is more pronounced. Renewable investment tax credits (TCRI) have a low yet significant negative relationship with valuation, possibly because of short-run capital commitments, delayed payoffs, or distrust towards policy credibility. These findings highlight the need to combine financial stability and environmental responsibility, particularly with the deepening global decarbonization requirements. Politically, the results also point to the key role of carbon taxes and the strength of controls in forming investor expectations and the firm value, which implies that a well-designed, credible transition incentive is critical to solving the behavior of the market and the climate goals. The paper adds to the existing literature on sustainable finance by providing a multidimensional empirical model of the assessment of the petroleum companies in the time of the low-carbon transition.