Abstract

This study verifies the effect of ETS(Emissions Trading Scheme) on the profitability of listed companies. This study analyzes whether the effect of ETS on a firm’s profitability is differentiated in each planning period (1st, 2nd) by differences of the types of ETS allocation. Also, this study analyzes whether in a firm’s characteristic according to response strategies, the effect of ETS on its profitability is differentiated in each planning period (1st, 2nd) by differences of the allocation method of ETS. First, the effect of ETS on a firm’s profitability is not found during the first planning period. But it is found that a firm’s profitability due to ETS is decreased during the second planning period. Second, a ETS firm with high carbon intensity shows decrease in its profitability during the second planning period. Third, it is found that, in a ETS firm with high energy efficiency, its profitability is increased during the second plan period. From this study, we infer that the effect of ETS on a firm’s profitability is differentiated in each planning period by the types of ETS allocation. Also, the effect of ETS on a firm’s profitability is different by its response strategy due to the method of ETS allocation. Combining the results of this study, it is found that the effect of ETS on a firm’s profitability is differentiated by each planning period by the overallocation and allocation type. In each characteristic of a company, the effect of ETS on its profitability is differentiated by each planning period by the allocation method. This study is meaningful as the first study to verify whether the effect of ETS on a firm’s profitability is different in each planning period. The results of this study will provide important implications for government system improvement. Furthermore, it has great implications for managers and shareholders in terms of corporate strategy development in response to ETS and climate change.

Keywords

• ETS
• types and methods of ETS allocation
• carbon intensity
• energy efficiency
• financial performance

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