Getting Serious About Carbon Pricing
Putting a price on carbon can be an effective policy to spur innovation, create lasting economic growth, and help India foster a low carbon economy
WHY PRICE CARBON
- Pricing carbon can provide an economically efficient means of reducing greenhouse gas emissions and minimizing the disruptive risks of climate change.
- A carbon price provides a relatively simple and direct way to ensure that more of the costs of climate change are brought into the economic calculus behind investments and consumption, including resource and fuel use.
- It sends a price signal that could influence widely dispersed economic decisions, help guide future economic growth toward a lower carbon economy, and reduce the impacts of climate change over time.
CARBON PRICING – AN EFFECTIVE TOOL TO MITIGATE EMISSIONS
- Expressing carbon emissions in monetary terms makes it easy for businesses to incorporate the data into their financial and planning strategies. Internal carbon pricing thus becomes an effective gauge to measure possible returns on future investments.
- Carbon price as a planning tool helps identify revenue opportunities and risks to reduce costs, emissions and guide capital investment decisions.
- If used effectively and in an unrestricted manner, it can become as much of a tool in decision making as ROI or profitability are.
HOW CARBON PRICING YIELDS BENEFITS FOR BUSINESSES
- Companies employing an internal carbon price are able to better manoeuver in regulatory environments where GHG emissions reductions are mandatory - such as EU, Canada, and are more responsive to external carbon prices.
- Many companies find that after setting absolute emission reduction and intensity goals, internal carbon price helps them evaluate returns on related investments and incentivize employees to meet established corporate targets.
- Internal carbon pricing encourages innovation and sustained economic competitiveness. It also helps companies identify organizational inefficiency that are adding to overall costs.
- It helps prepare for the forecasted low carbon economy and to increase their own efficiency and market profitability.
JOIN THE MOVEMENT
Many companies have begun to incorporate an internal price on carbon into their long-term corporate decision-making. ExxonMobil uses USD 60 per metric ton, BP uses USD 40 per metric ton and Google uses USD 14 per metric ton of carbon when conducting internal cost-benefit analyses.
More than 1,000 businesses joined 74 countries and 23 sub-national jurisdictions at the 2014 United Nations Climate Summit to vocalize support for putting a price on carbon, including powerhouses like Nestlé, Unilever and Nokia. They made clear that pricing carbon is not only good for the climate, but it is also good for business, as it is among the most efficient and cost-effective ways to reduce emissions.
Some of the world’s largest energy suppliers are now supporting carbon pricing. In May 2015, six of Europe’s biggest oil and gas companies, including BP and Royal Dutch Shell, signed a letter to world leaders formally requesting an explicit price on carbon, arguing that carbon pricing would lead to greater efficiency and consistency across the energy market.
To join the movement and to become a climate leader in taking this important step towards a low carbon economy, write to vadhia@wri.org or CGajjar@wri.org
