Business use of carbon pricing soars

19th September 2016


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  • Mitigation ,
  • Reporting ,
  • Carbon Trading

Author

Louise Weickert

More than 1,200 companies are putting a price on their carbon emissions or have plans to do so in the near future, according to the CDP.

Of 5,759 companies responding to the CDP’s request for information, 517 are already using internal carbon pricing as an accounting or risk management tool, a 19% increase from 2015. A further 732 firms said they plan to introduce an internal carbon price within two years, a 26% rise.

The organisation, formerly known as the Carbon Disclosure Project, noted in its report a significant rise in carbon pricing among firms in Mexico, with the number using or planning to use it doubling, from 13 in 2015 to 26. The increase came after the Mexican government outlined plans to introduce an emissions trading scheme in 2018, CDP noted.

There were also big rises in firms in the US, Brazil and India using or planning to use internal carbon pricing. In the US, the number has increased from 147 to 210 (a 43% rise), while 47 companies in Brazil (74% increase) and 44 in India have implemented it (63% increase).

Globally, the largest proportion of companies that have adopted a price on carbon are in the utilities and energy sectors, with 63% and 52% respectively. This compares with the telecommunication (40%), materials (35%) and financial (31%) sectors.

Thirty-seven companies said their use of internal carbon pricing had a tangible impact on business decisions, including investment in energy efficiency measures and low-carbon initiatives, and the development of low-carbon products.

For example, energy company Engie said it decided not to invest in further coal developments after completing a carbon price analysis, while in the UK, media organisation Sky said that it used an internal price of carbon to help build a stronger business case for onsite renewable energy.

The CDP noted several examples of companies using carbon pricing to help achieve their climate targets by enhancing the business case for low-carbon investments. This marked a shift from its usual use as a tool to assess investment decisions, it said.

However, just 30% of companies disclosing the price they were using, which ranged from less than $1/tonne of carbon to more than $800/tonne. In the UK, prices range from $10/tonne to $291.65/tonne.

Despite the global rise in firms using carbon pricing, the CDP warned that more than 500 of the 3,234 companies who were not using the tool were potentially at regulatory risk, since they operate in high-emitting industries. Around 400 of these had head offices in countries that have or are considering implementing a price on carbon, it said.

Lance Pierce, president of the CDP in north America, said: ‘There is a sea change happening in the investment world on this issue and demand for CDP data has dramatically increased on the part of investors who are reading the “writing on the wall” as they seek to identify high-carbon activities in their portfolios.’

Writing in the report, Jack Ehnes, chief executive of pension fund CalSTRS, and Mats Andersson, vice-chairman of the Global Challenges Foundation, said: ‘In our funds, we have already begun to identify the worst polluters in each sector to mitigate risk in our portfolio. We believe that these companies will be doubly hit in the economy of the future – not only with their profit and loss be damaged, but they will also be significantly devalued over the long term, which greatly concerns us as shareholders.

‘We are actively engaging with various companies to ensure our capital is allocated to lower-risk, higher-return activities.’

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