The idea that companies are already pricing carbon should be considered carefully; many internal carbon prices are very low, and many internal carbon prices don’t necessarily influence decision-making. Companies that might want to internall price carbon at a significant level are fighting an uphill battle. The unfortunate reality is that any company that acts as if carbon actually has a materially high price might turn out to be better prepared for a carbon-constrained future, but could easily deliver lower profits in the short-term as compared to competitors who are acting on the basis of how energy actually IS priced today.
At the end of the day, companies cannot realistically unilaterally internalize an economic externality like unpriced carbon. To do so would be them at an economic disadvantage, all things being equal. Only policy makers can really internalize the carbon externality.
Much has been made of companies deciding to price carbon internally through some means. Does this suggest a fundamental change in corporate practice, and potentially serve as a precursor to policy-based carbon pricing?
It is not easy to interpret the current state of internal corporate carbon pricing. While several CDP reports currently list examples of carbon pricing, it is much less clear how these prices are factoring into business decision-making. In some cases they function as a modest carbon tax, raising funds for energy efficiency investments. In other cases they are used in sensitivity cases for investment decisions. But whether internal carbon pricing is or will materially shift business decisions is still hard to determine.
Companies all over the world are choosing to establish an internal carbon price as part of their decision-making. This is often characterized as a measure they are taking in response to the failure of public policy to establish a societal carbon price as economists and many others have long been calling for. Internal corporate carbon pricing can’t substitute for economy-wide carbon pricing, but it’s a forward step.
These internal carbon pricing efforts range widely in purpose and $ value. Some companies are using the price as an internal carbon tax in order to raise money for energy efficiency and other measures. Others are using the price in evaluating investment decisions.
The Big Questions – Will internal corporate carbon pricing really influence corporate decision-making when it comes to investments and other decisions? Will internal corporate carbon pricing lead to more policy advocacy of economy-wide carbon pricing?
These topics are important because carbon pricing will be key to any societal efforts to tackle climate change. Whether explicit or implicit, carbon pricing will be perhaps the single most important driver of corporate climate strategies.
In our next chapter, we’ll tackle scenario planning, a subject that can play a major role in helping companies adapt to the uncertainties surrounding climate change and climate change policy.
Companies all over the world are choosing to establish an internal carbon price as part of their decision-making. This is often characterized as a measure they are taking in response to the failure of public policy to establish a societal carbon price as economists and many others have long been calling for.Internal corporate carbon pricing can’t substitute for economy-wide carbon pricing, but it’s a forward step.
These internal carbon pricing efforts range widely in purpose and $ value.Some companies are using the price as an internal carbon tax in order to raise money for energy efficiency and other measures. Others are using the price in evaluating investment decisions.
The Big Questions – Will internal corporate carbon pricing really influence corporate decision-making when it comes to investments and other decisions? Will internal corporate carbon pricing lead to more policy advocacy of economy-wide carbon pricing?
Many companies report that they are pricing carbon internally as a proxy for a policy-based carbon price. Does this suggest a fundamental change in corporate practice with potentially material business decision-making implications?
It is not easy to interpret the current state of internal corporate carbon pricing.While several CDP reports currently list examples of carbon pricing, it is much less clear how these prices are factoring into business decision-making. In some cases they function as a modest carbon tax, raising funds for energy efficiency investments. In other cases they are used in sensitivity cases for investment decisions. But whether internal carbon pricing is or will materially shift business decisions is still hard to determine.
It’s beyond the scope of this page to comprehensively explore these and other topics, but we’ve organized substantial resources below to allow you to dig deeper into the topics on your own.
Upon request the Climatographers can utilize these and other materials to answer specific questions you may have, or in support of internal briefings or other needs. For more information see: Topical Briefings/Courses
Resources:
- A few specific source materials: Coming Soon
- Relevant Topical Headings in the Climate Web. To understand the codes you see, visit this FAQ - What do the different Heading types mean?.
- I:InternalCarbonPricing
- I:CarbonPricingApproaches/Strategies
- I:BusinessCarbonPricingAdvocacy
- S - Internal Corporate Carbon Pricing
- S - Why and How of Pricing Carbon
- N - Internal Carbon Pricing - Business and Other
- N - Carbon Pricing Advocacy
- E - Internal Business Carbon Pricing
- E - Internal Business Responses
- T - Carbon Pricing Networks
- V - Carbon Pricing
- For a broader exploration, see Topical Dashboards that can pull together resources including published reports and journal papers, news and opinion pieces, ideas and graphics extracted from sources, videos, websites and web pages, and more:
- Relevant Wikipedia pages:
- “Pre-set search strings” help you quickly scan for additional or new topical relevant information via Google, Google Scholar, Twitter, YouTube, Vimeo, Quora, Reddit, and DeepDyve. Here’s a descriptive video. As shown in the video, pre-set searches work with on-line access, but are far more useful if you’ve downloaded the Climate Web with Premium Access. The searches then instantly open up in the Climate Web itself, saving you a lot of time.