Carbon Accounting and Sustainability: Value Relevance of Emission Allowance Assets and Liabilities Under Korea’s Emissions Trading Scheme

Emissions trading systems are central policy instruments for the transition toward a low-carbon economy, yet evidence on the value relevance of recognized carbon items is limited. This study examines whether the recognition and reported amounts of emission allowance assets (EAs) and emission liabilities (ELs) are associated with share price conditional on conventional accounting information. Using 16,036 firm-year observations of KOSPI and KOSDAQ non-financial firms from 2018 to 2025, reflecting the available coverage of firm-level EA and EL data, this study employs an extended Ohlson price model. EA recognition is negatively associated with share price, and this association remains statistically significant in both the industry and firm fixed-effect specifications. The reported amount of EAs is also negatively associated with share price, although the result is sensitive to model specification. The positive associations of EL recognition and reported amounts do not persist after controlling for firm fixed effects, although they are observed in the industry fixed-effect specifications. The findings are consistent with the interpretation that recognized carbon-accounting items may capture information about regulatory exposure and operating conditions beyond their formal accounting classifications. These findings provide evidence on the value relevance of recognized carbon-accounting information under the K-ETS.