Internal carbon pricing for chemicals companies

With the spread of global tax regimes and policies designed to influence decarbonization, more corporations are adopting internal carbon pricing (ICP) to try to get ahead of evolving regulations. This includes wider ICP adoption among companies in the heavy-emitting and hard-to-abate chemicals sector.

Chemicals is the third-largest carbon dioxide emitting industry, amounting to between 5 percent and 6 percent of global emissions. The pressure to decarbonize only continues to grow as global government and corporate net zero goals look increasingly harder to achieve. Chemicals clearly has an important role to play in reducing carbon given the sector’s impact. But that role comes with a regulatory burden to carry through the transition to a low-carbon future, as well as a risk: chemicals companies that fail to reduce their emissions today may be left with higher-carbon products that are less competitive in the global markets of tomorrow. Internal carbon pricing is a strategy chemicals companies can use to not only get ahead of regulated carbon pricing, but also add to their toolkit to better manage carbon pricing risk, reduce operating costs, and incentivize lower emission behavior.