Climate change presents both risks and opportunities for business. In the private sector, many companies are committing to take action to stay ahead of the material risks of climate change and take advantage of emerging low-carbon opportunities. The number of companies disclosing to CDP that they embed an internal carbon price into their business strategies has grown from 150 global companies in 2014 to over 600 companies in 2017.
Carbon pricing has emerged as a key policy mechanism to curb and mitigate the dangerous impacts of greenhouse gas pollution and drive investments towards cleaner, more efficient alternatives.
The number of jurisdictions with carbon pricing policies has doubled over the past decade, with over 40 national and 25 regional governments already putting a price on carbon through emissions trading systems and taxation.
There is growing consensus that carbon pricing is the most flexible and the most cost-effective approach to mitigating the impacts of climate change. This momentum is expected to continue as the international community acts to implement the Paris Agreement.
In response to shifting regulatory and market dynamics, internal carbon pricing has emerged as a tool that supports companies in assessing climate-related risks and opportunities.
In 2017 nearly 1,400 companies – including more than 100 Fortune Global 500 companies with collective annual revenues of US$7 trillion – disclosed that they are currently using, or planning to implement, an internal carbon price within two years.
By attributing a monetary value to climate risks, and translating them into a uniform metric, financial decision-makers within a company are able to make the low-carbon transition an integral part of their business strategy.
Carbon pricing is moving up the agenda for investors as a material risk that companies must consider in their decision-making. This is mandated by the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD).
A recent model developed by Schroders estimates that “almost half of listed global companies would face a rise or fall of more than 20% in earnings if carbon prices rose to $100 a tonne.”
Investors are demanding more transparency around a company’s internal carbon pricing response and turn to CDP for this data. Some have even started testing the use of this tool on their own portfolios to assess the potential carbon value at risk.
CDP’s unique data on internal carbon pricing offers insights that can inform policies to integrate the economic cost of carbon emissions into long-term planning, policy development, and infrastructure investment at the national and subnational levels.
By facilitating dialogue between companies, investors, and policymakers, CDP aims to accelerate the uptake of effective carbon pricing policies that catalyze low-carbon investment and spur innovation.
Under the auspices of the Carbon Pricing Leadership Coalition, we work with a global network of partners to support the explicit inclusion of carbon pricing in the next global agreement on climate change, thereby accelerating greenhouse gas emission reductions.
CDP is expanding its toolkit for companies to introduce an internal carbon price that materially impacts business operations and investment decisions.
Our unique data, research, and collaborative initiatives provide a benchmark for best practice and sector trends. This helps companies take full advantage of opportunities from the low-carbon transition.
Our Carbon Pricing Corridors Initiative will provide a vital benchmark for companies conducting scenario analysis for TCFD -compliant disclosures, as well as those that have committed to comply with the Paris Agreement by setting science-based emissions reduction targets.
Starting in 2018, CDP’s enhanced disclosure on carbon pricing will further enable investors to consistently track and analyze corporate exposure to carbon pricing regulations and their risk management strategies for compliance.
Through the Carbon Pricing Corridors Initiative, CDP is working with leaders from the business and investment communities to translate the uncertainty of future carbon prices into scenarios of risk, thereby facilitating the integration of carbon pricing into investment analysis.
CDP is also exploring how the finance sector can use a carbon pricing metric to manage a broader set of regulatory, market, technological and reputational risks in their financed emissions.
Explore the Data
Carbon Pricing Connect
Carbon Pricing Connect is a data visualization tool featuring CDP's extensive data on internal carbon pricing with respect to global regulatory policy.
Research & Guidance
Reference the CPLC Resource Hub for external research on current and emerging carbon pricing practices tailored to a wide audience of stakeholders.
The TCFD recommends that companies acknowledge the reality of transition risk by running scenario analyses of potential future climate outcomes (including a 2°C scenario). In my view, central to any such scenario analysis should be gauging the impact of carbon pricing on company business models—over time capital will be re-allocated in accordance with carbon-pricing signals.Mark Lewis, Managing Director, European Utilities Equity Research, Barclay Capital; Member of the TCFD
Leaders' Stories
Internal carbon pricing is a prudent accounting and risk management tool undergoing rapid adoption by those looking towards a low-carbon future. These industry leaders, including Novartis, Saint-Gobain, Royal DSM and Nissan Motor Co., Ltd., are taking the first steps to maintain a strong economic position in a shifting landscape, and disclosing to CDP to help measure their impact and progress along the way.
Arçelik sees climate change as both a key risk and opportunity for its business.
Harmony is planning to obtain at least 50% of its future electricity from renewable sources.
Nissan is developing low to near-zero carbon emission motor vehicles.
Novartis has decided to embed climate change into its corporate strategy.
Royal DSM reported a target to improve its GHG efficiency by 45% by 2025 from 2008 levels.
An internal price on carbon will be used to prioritize and manage CO2 action plans.
SUEZ has set a target of 30% reduction of Scope 1 and Scope 2 combined emissions by 2030.
Carbon Pricing Partners
