Setting a $100 Price on Carbon

Posted by Lise Kingo, Executive Director, UN Global Compact on the Huffington Post Blog on 22 April 2016

As more than 165 Member States convene at the United Nations for the historic signing of the Paris Agreement, the United Nations Global Compact is calling on companies to set an internal price on carbon at a minimum of $100 per metric ton over time. 

Today’s signing ceremony at the UN is about making sure that we turn aspirations into actions, and setting a price on carbon is one of the most effective ways to drive climate into corporate strategy and investment. 

Around the world, strong momentum is building among Heads of State, city and regional leaders as 40 nations and more than 20 cities, states and regions have adopted or are planning explicit carbon prices, covering approximately 12 percent of global GHG emissions. 

Investors are also calling for a price on carbon. The UN-backed Principles for Responsible Investment, a substantial group of investors holding $59 trillion in assets under management, have pledged to invest based on sustainability criteria, consistent with producing shareholder return. A subset of these investors has specifically called on companies to apply an economically meaningful price on carbon, including some investors decarbonizing their portfolios.

Based on our work with over 70 companies that have already internalized a price on carbon, we believe that $100 is the minimum price needed to spur innovation, unlock investment, and shift market signals to ultimately reduce global greenhouse gas emissions in line with the 1.5 to 2-degree Celsius target. 

Already many leading companies have taken steps to price carbon at even $50 or $60, which today is notable. However we need to see an ascent in ambition and price across the board. 

We especially urge companies participating in our Caring for Climate initiative to take a leadership position and adopt the $100 price by 2020. Through our Business Leadership Criteria on Carbon Pricing, we invite companies to take on the triple challenge of setting, advocating for and reporting on an ambitious price on carbon.

The private sector has a critical role to play if we are to achieve a below 2-degree Celsius pathway: transforming business models, reducing emissions and redirecting investments. The Paris Agreement sends a clear signal that business and investors need to put climate at the heart of strategy and decision-making. We believe that a price on carbon is a key step in reaching a low-carbon and resilient future.