More and more companies are adopting internal carbon pricing schemes—to manage decarbonization programs, help in ESG reporting, and prepare for carbon taxes.
The reasons for developing an internal carbon pricing (ICP) program are growing. So, too, is the number of companies using ICP or planning to. By setting a price on the carbon use of the organization, companies can better manage transition risk and evaluate business strategies that prepare themselves for a low carbon future.
ICP also has near-term benefits, too. ICP enables companies to make decarbonization a company-wide effort through internal carbon fees and incorporating carbon pricing data into other financial evaluative measures. Setting up an ICP program, however, can be a complex undertaking. It requires collecting new kinds of data from all corners of the enterprise and extrapolating carbon emission levels from energy usage in office buildings, factories, trucking fleets, and warehouses. Some companies are also using carbon pricing to help manage Scope 3 emissions (created by supply-chain partners).
In this paper we look at the state of play of ICP today—how it is being used and the benefits it is generating—and discuss how companies can go about adopting and managing ICP programs.