The value relevance of climate change: A preliminary study of oil and gas companies in Australia

Abstract

This study examines the reciprocal relationship between the oil and gas industry on one hand, and weather and climate on the other hand, and the subsequent impact of this relationship on the market value of the industry in an Australian context. The oil and gas industry is crucial to the Australian economy. The industry is affected by change in the climate and is responsible for a substantial portion of carbon emissions. The GARCH and linear multivariate regression models been applied, in order to obtain more informative results. The study concludes that climate change is value relevant for the oil and gas industry. Moreover, the study confirms that a relationship exists between carbon emissions and the market value of the Australian oil and gas industry, and this relationship is highly significant and positive. The Australian oil and gas industry is still viewed as an important part of investors' portfolios.