Most of the world's biggest companies are failing to cut their carbon emissions even though the long-term cost of complying with tougher rules to tackle global warming could have a devastating impact on their profitability.

An authoritative report published yesterday in New York also warns that climate change litigation could one day become as big a threat to big corporations as asbestos and tobacco lawsuits are today.

The study by the Carbon Disclosure Project (CDP), an initiative backed by institutional investors controlling more than $21 trillion (£12 trillion) of assets, warns there is a huge and worrying gap between awareness among big companies of the risks posed by climate change and action to combat it.

According to the report, fewer than one in seven of the world's top 500 companies by market capitalisation has reduced carbon emissions in the past year and in more than one-sixth of cases emissions have gone up.

The study says that in the most extreme circumstances the cost of meeting tougher curbs on carbon emissions could wipe as much as 45 per cent from the annual profits of some companies such as big American power producers. Steel and mining companies could see reductions in earnings of as much as 20 per cent while the chemicals sector could face annual compliance costs equal to nearly 4 per cent of net profits.

The calculations, conducted by analysts working for the CDP, are based on the price of carbon rising to $50, or €41, a tonne and companies being forced to cut their emissions by 20 per cent over the next seven years to comply with the Kyoto Protocol on global warming.

America is not a signatory to Kyoto but in Europe, where a carbon emissions trading regime has been introduced to enable member states to meet their obligations, carbon is trading at about €30 a tonne, although there has been a high degree of volatility in prices.

Of the 500 companies surveyed, 71 per cent provided a comprehensive response to the questionnaire sent them and a further 18 per cent provided more limited information. Among the respondents were giants of the UK business scene such as BP, Unilever, Tesco ScottishPower and Barclays. About half the top 500 are US companies and 10 per cent are British.

Although more than 90 per cent recognised that climate change posed either a risk or potential opportunity, only 51 per cent had implemented an emissions-reduction programme and only one-third had got involved in emissions trading.

The CDP was launched in 2000 with the backing of Tony Blair, and this is its third report. The fact that institutions controlling 40 per cent of all the pension funds invested worldwide also support the initiative demonstrates how seriously big investors are beginning to take climate change.

However, a significant number of big companies have chosen to ignore the initiative, even though more than 20 per cent of their shares are held by institutions which are signatories.

Included in the "blacklist" of companies that failed or declined to participate in the survey are Boeing, Home Depot, Wal-Mart, Apple, News Corporation and Carnival. Nearly half of those surveyed refused to disclose any emissions data.

However, James Cameron, the chairman of the CDP, said there was a growing awareness of global warming and the threat it posed, particularly among big American companies. "Wall Street is waking up to climate change risks and opportunities," he said. "Considerably more of the world's largest corporations are getting a handle on what climate change means for their business and what they need to do to capture opportunities and mitigate risks."

© 2005 Independent News & Media (UK) Ltd.

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