Greenhouse gas disclosures: evidence from the EU response to Kyoto

In 2005, the European Union instituted the first phase of the Kyoto Protocol by implementing a carbon allocation scheme (cap and trade) to reduce greenhouse gas (GHG) emissions. Prior to 2005, the Scandinavian countries had imposed a carbon tax to reduce carbon emissions. In this study, the EU experience with cap and trade and carbon taxes is compared concluding that neither endeavour was particularly successful in reducing GHG emissions. Disclosures made by firms that were impacted by the GHG emission reduction schemes are then examined. After controlling for size and industry group, firms from the UK and firms that just participated in cap and trade made significantly greater disclosures.