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High emitters in the ASX 200 exposed to climate change impacts

Highlights

Trucost analysed data on the direct carbon and water impacts from the operations of ASX 200 companies, as well as impacts from direct (first-tier) suppliers, such as electricity, transport and logistics providers. The majority of emissions are carbon dioxide from fossil fuel use.

The Australian Government introduced Bills to Parliament this month to support a shift to a clean energy future, including a bill to put a price on carbon.

The plan aims to reduce Australia's greenhouse gas emissions to help reduce the risk of climate change. The already hot and dry country is vulnerable to climate change impacts such as changing temperatures and rainfall patterns, more droughts, floods, water shortages, rising sea levels and extreme weather. Risks to the environment and economy were highlighted earlier this year after flooding and a cyclone caused lower GDP growth and a drop in earnings for many companies. Since then, the Murray Darling Basin has seen the driest winter in almost 12 years. Evidence is growing that greenhouse gases are contributing to climate change impacts including lower rainfall in the south-west and south-east of Australia. For now, taxpayers are picking up the tab to compensate businesses, farmers and communities affected by flooding and drought. The largest rise in Australia's emissions between 2009 and 2010 came from industrial processes in industries such as chemicals and metal production. The production of non-ferrous metals and iron and steel also contributed to a rise in emissions from stationary energy. Trucost analysed data on the direct carbon and water impacts from the operations of ASX 200 companies, as well as impacts from direct (first-tier) suppliers, such as electricity, transport and logistics providers. The majority of emissions are carbon dioxide from fossil fuel use. Findings show that the Basic Resources sector has the highest average greenhouse gas emissions relative to revenue, followed by the Utilities, Chemicals, Construction & Materials and Oil & Gas sectors (see Chart 1). The widest range in carbon intensity at a company level is in the Construction & Materials sector. However, if carbon pricing were applied to operational emissions only, direct exposure to carbon costs would vary most for companies in the Basic Resources sector (see Carbon Counts 2011). Energy-intensive companies in industries such as mining may opt-in to the carbon pricing scheme to help manage carbon costs. Chart 1: Five most carbon-intensive sectors in the ASX 200 Five most carbon intensive sectors in the ASX 200 Basic Resources, Utilities, Chemicals and Construction & Materials are also among the five most water intensive sectors, as shown in Chart 2. Companies dependent on energy are also relatively dependent on water. Carbon-intensive companies lobbying against plans to reduce emissions could be increasing their own exposure to water risks. Chart 2: Five most water-intensive sectors in the ASX 200 Five most water intensive sectors in ASX 200