Financial statement disclosures and environmental performance by US companies participating in the EU emissions trading system

In this study, we examine US firms that owned plants in the European Union (EU) that were among those required to participate in the EUu0027s cap-and-trade system (EU-ETS) developed to reach emissions goals compliant with the Kyoto Protocol (Kyoto). Based on a Securities and Exchange Commission (SEC) interpretive release, US participants in the EU-ETS are required to disclose that involvement in their regulatory filings. Since these plants had to meet EU carbon emission standards, the research questions considered here is how successful the firms were in reducing carbon outputs and what was disclosed about their environmental performance. The results indicate that for these plants carbon emissions in 2012 declined relative to 2008 levels. And, in terms of disclosure, these firms disclosed significantly more about climate change and their EU-ETS participation during the later period than they did in 2008.