Most of the world's biggest companies are failing to cut their carbon emissions even though the long-term cost of complying with tougher rules to tackle global warming could have a devastating impact on their profitability.
An authoritative report published yesterday in New York also warns that climate change litigation could one day become as big a threat to big corporations as asbestos and tobacco lawsuits are today.
The study by the Carbon Disclosure Project (CDP), an initiative backed by institutional investors controlling more than $21 trillion (pounds 12 trillion) of assets, warns there is a huge and worrying gap between awareness among big companies of the risks posed by climate change and action to combat it.
According to the report, fewer than one in seven of the world's top 500 companies by market capitalisation has reduced carbon emissions in the past year and in more than one-sixth of cases emissions have gone up.
The study says that in the most extreme circumstances the cost of meeting tougher curbs on carbon emissions could wipe as much as 45 per cent from the annual profits of some companies such as big American power producers. Steel and mining companies could see reductions in earnings of as much as 20 per cent while the chemicals sector could face annual compliance costs equal to nearly 4 per cent of net profits.
The calculations, conducted by analysts working for the CDP, are based on the price of carbon rising to $50, or EUR41, a tonne and companies being forced to cut their emissions by 20 per cent over the next seven years to comply with the Kyoto Protocol on global warming.
America is not a signatory to Kyoto but in Europe, where a carbon emissions trading regime has been introduced to enable member states to meet their obligations, carbon is trading at about …