Rio De Niro is modelling the impact of the Carbon Tax Act, where each tonne of scope 1 emissions will be taxed at $30, on Arc Steel. Arc Steel makes steel-based roofing products. Before the Carbon Tax Act was announced, Rio De Niro had forecast earnings per share next year to be $4.00. The direct cost of the tax equates to a reduction of $1.00 of EPS, taking his estimate down to $3.00. 

QUESTION:
A) Where does the Carbon Tax Act fit in the context of Figure 1 above? Justify the answer.
 
B) Give two reasons why the estimate of $3.00 could be too low.

C) Using Figure 1 above, explain two other risks or opportunities that climate change may create for Arc Steel.
D) Pacino and his fund lobbied in support of the Carbon Tax despite this negative impact on earnings. Outline an argument why this could be aligned with their fiduciary duties.

Transcribed Image Text:

Figure 1 Climate-Related Risks, Opportunities, and Financial Impact Transition Risks Policy and Legal Technology Market Reputation Physical Risks Acute Chronic Revenues Expenditures Income Statement Risks Opportunities Strategic Planning Risk Management Financial Impact Cash Flow Statement Opportunities Resource Efficiency Energy Source Products/Services Markets Resilience Balance Sheet Assets & Liabilities Capital & Financing Figure 1 Climate-Related Risks, Opportunities, and Financial Impact Transition Risks Policy and Legal Technology Market Reputation Physical Risks Acute Chronic Revenues Expenditures Income Statement Risks Opportunities Strategic Planning Risk Management Financial Impact Cash Flow Statement Opportunities Resource Efficiency Energy Source Products/Services Markets Resilience Balance Sheet Assets & Liabilities Capital & Financing

Answer rating: 100% (QA)

A Carbon Tax Act in the Context of Figure 1 In the context of Figure 1 the Carbon Tax Act falls under the Policy and Legal transition risk category It ... View the full answer