Why Your Company Should Put a Price on Carbon
Why your company should put a price on carbon
Yesterday at a special event on the margins of COP21, Heads of State put the spotlight on carbon pricing as a necessary and effective measure to tackle the climate change challenge. Together with a global agreement, a sufficient price for carbon will help create the necessary rules and market signals to limit warming to 2°C.
To mobilize companies to take action, the UN Global Compact – together with UNEP, the UNFCCC secretariat and Caring for Climate partners – launched the Business Leadership Criteria on Carbon Pricing at the UN Secretary-General’s Climate Summit just over a year ago. The Criteria set a high bar for companies, calling them to set an internal carbon price, advocate publicly for carbon markets, and communicate on progress over time. Over 60 companies representing US$1.9 trillion in market capitalization have aligned with the criteria and are taking strong, urgent action against climate change.
However, more than 1,000 companies report that they are pricing carbon internally now, or will be by 2017. We want all of them -- and even more companies – to align with the Criteria. Learn more about the Criteria and how your company can become a Carbon Pricing Champion. In addition, companies that align with the Criteria are contributing to the goals of the multi-stakeholder Carbon Pricing Leadership Coalition led by the World Bank.
To help companies put their carbon pricing commitments into action, yesterday the UN Global Compact and World Resources Institute, together with Caring for Climate partners, released the Executive Guide to Carbon Pricing Leadership: A Caring for Climate Report. The guide, which features insights from more than 100 companies from around the world, is designed for individuals who are now completing due diligence on carbon pricing of behalf of their companies.
Through interviewing more than 15 companies, surveying nearly 100 and gathering input during an open consultation period this fall, the partners found that the top 5 reasons companies price carbon include:
- Preparing for policies affecting the company’s operations or value chain;
- Seeking to achieve ambitious GHG goals, such as science-based GHG targets;
- Translating climate change into financial terms;
- Responding to investor and customer demands; and
- Learning, testing and showcasing effective carbon pricing approaches.
Practically, the research uncovered that companies tend to take one of three distinct approaches to price carbon: internal carbon taxes, fees or trading systems; shadow pricing; or implicit pricing. The guide outlines what each of these approaches means and features company case examples illustrating how businesses have put them into practice.
The guide also highlights the benefits and challenges companies face when they price carbon. Companies say the top benefit is that carbon pricing helps them to “translate carbon into business-relevant terms and engage internally.” At the same time, businesses most frequently citied “lack of common method or guidance to set a carbon price” as their biggest challenge – something this guide seeks to address.
As companies look to show climate leadership beyond COP21, being a carbon pricing champion presents clear opportunities. Leadership means calling for effective policy, including by urging governments to help create clarity for future planning or by engaging responsibly in policy dialogues through coalitions and trade groups.
For more on how your company can put a price on carbon, download the Executive Guide to Carbon Pricing Leadership: A Caring for Climate Report.
