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| Author: | Johnston, D. M. Sefick, S. E. Soderstrom, N. S. |
| Title: | The value relevance of greenhouse gas emissions allowances: an exploratory study in the related United States SO2 market |
| Journal: | European Accounting Review
2008 : DEC, VOL. 17:4 p. 747-764 |
| Index terms: | USA asset valuation capital markets environmental policy option valuation |
| Language: | eng |
| Abstract: | The study examines the valuation implications of greenhouse gas (hereafter as: GHG) emissions allowances. The value of a firm's bank of emission allowances is supposed to have two components likely to be positively valued by the capital market: an asset value component and a real option value component. The study tests the assumption by examining the value relevance of sulfur dioxide (SO2) emission allowances held by US electric utilities. Empirical results reveal that the capital market assigns a positive price to a firm's bank of SO2 emission allowances. This is consistent with the argument of emission allowances having at least an asset value component that is assigned a positive price by the market. |
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