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Third of large companies implementing an internal carbon price

Published May 7, 2021

Third of large companies implementing an internal carbon price

More than a third of large businesses are currently using or plan to use an internal carbon price, according to a CDP survey.

The CDP, a non-profit that runs the world’s environmental disclosure system, conducted the research in 2020 on nearly 6,000 business from 84 countries. The survey found that more than 2,000 of the businesses – representing more than $27trn – are factoring in the cost of carbon into their business plans.

The survey also showed that close to half of the world’s 500 biggest companies have adopted internal carbon pricing, including such names as Microsoft, Ørsted, and Mitsubishi Corporation.

”This is an innovative way for companies to direct investment towards their sustainability growth, using greening measures related only to structural change within themselves. These are not for offsets or an extra few pence per kW to procure green energy. This is about creating a separate account into which to allocate funds to green programmes for the company. This is viewed as innovative, and now there’s a lot more uptake, as the CPD report shows,” said Nick Fedson, sustainability analyst at Alfa Energy Group.

The highest average price was found to be in Europe at $28 per metric ton of CO2e, but the CDP foresees that companies will need to adjust costs higher as more countries bring in carbon pricing regulation and as carbon prices continue to increase in the EUETS.

All the regions surveyed, with the exception of Africa, saw an increase in companies planning to implement or already implementing an internal carbon price in the last two years. Asia in particular had the largest increase, with China alone seeing an increase of 27% in commitment to internal carbon pricing from 2019 to 2020.

“It’s interesting that companies are doing this voluntarily, they’re not being forced to do this. This isn’t about responding to an externally applied carbon price. They are doing this for good business reasons, but they also see the way the wind’s blowing and taking steps to introduce a carbon price anyway. Any price is likely to be more effective than zero and they’re making it public as well. It raises the bar against which their competitors are judged,” commented Jeremy Nicholson, Alfa Energy Group’s Corporate Affairs Officer.

Most companies cited the need to drive low-carbon investment as a reason for factoring in carbon prices, as well as improved energy efficiency and internal behaviour. Many are also taking other actions to reduce emissions by setting comprehensive emissions reduction targets or using more renewable energy.

Global regulation, current and future, are also a major factor in most companies’ decisions to implement internal carbon pricing. Governments or regulators have put in place or scheduled 64 carbon pricing initiatives s across the world.