Set an internal price on carbon

What is this action about?

Compensation will not be a voluntary option for much longer. Therefore, it is smart to prepare for increased carbon taxes earlier than your competitors. Plus, it is forward-thinking to simply treat carbon removals as you do any other business expense – by assigning a monetary value and budgeting for it – allowing you to work towards reducing your emissions, hence reducing your carbon removal costs too. This approach makes your transformation towards carbon neutrality a priority for the whole company and influences further decision-making across all departments.

According to C2ES, "Internal carbon pricing generally takes one of three forms:

• An internal carbon fee

   is a monetary value on each ton of carbon emissions, which is readily understandable throughout the organization. The fee creates a dedicated revenue or investment stream to fund the company’s emissions reduction efforts.

• A shadow price

   is a theoretical price on carbon that can help support long-term business planning and investment strategies. This helps a company prioritize low-carbon investments and prepare for future regulation.

• An implicit price

   is based on how much a company spends to reduce greenhouse gas emissions and/or the cost of complying with government regulations. It helps companies identify and minimize these costs, use the information gained from this to understand their own carbon footprint.

Many companies use a hybrid model of complementary approaches that combine these different attributes." (Source)

According to the World Bank, the UN Global Compact has called for businesses to adopt an internal carbon price of at least US$100/tCO2e by 2020, to keep GHG emissions consistent with a 1.5–2°C pathway.