More than one-third of large companies putting a price on carbon internally, CDP finds

A survey of some 6,000 large businesses on carbon pricing has revealed that more than one-third are using an internal carbon price or are planning to implement one by 2023.

Orsted, the operator of the pictured Horns Rev 2 offshore wind farm, is named in the report as a leader on corporate carbon pricing. Image: Orsted 

Orsted, the operator of the pictured Horns Rev 2 offshore wind farm, is named in the report as a leader on corporate carbon pricing. Image: Orsted 

Conducted by CDP, the survey asked businesses whether they had made public plans to price carbon. Such an approach is regarded as a way to factor ‘true’ environmental costs into decision-making, helping businesses to steer away from short-term money-makers that have high carbon footprints.

It found that more than 2,000 businesses, collectively representing more than $27trn of market capitalisation, had such commitments in place. Uptake was even more pronounced among the world’s 500 largest companies, with almost half having made such commitments.

Overall, CDP believes that the uptake of this approach has grown by 80% since 2015. Particularly strong progress has been recorded in sectors including manufacturing, fossil fuels and financial services.

CDP also assessed the prices which corporates assign to carbon. The average stood at $25 per metric tonne of CO2e for Asian firms and $28 per metric tonnes for European firms.

While acknowledging progress to date, CDP is warning that internal prices will need to be increased steeply, in line with the growth of carbon pricing schemes and their levels of pricing. China, for example, is introducing its first emissions trading scheme (ETS) this year, after legislating for carbon neutrality by 2060. The EU, meanwhile, is due to raise its ETS prices to $44.80 per metric tonne of CO2e.

As well as initially increasing prices, CDP’s report on the survey implores businesses to take a longer-term view of carbon pricing and develop timelines for their adjustment. This, it argues, will help businesses to avoid risk. Most firms with carbon pricing are already taking this approach to some extent.

“Our latest data shows a clear correlation between companies putting a price on carbon and those taking other strategic decisions to combat climate change,” CDP’s global director of climate change Nicolette Bartlett said.

With the urgency of the climate crisis requiring a systemic shift in corporate behaviour, it is encouraging to see such an increase in the number of global companies taking positive steps forward, and pricing carbon risks into their businesses.

“However, with more carbon pricing systems emerging every year, prices rocketing and an increase in regulation which places an effective price on carbon emissions, companies need to start anticipating these inevitable policy shifts, taking action in their value chains, and disclosing these risks to their shareholders.

“Governments too should take note of this trend and be confident in upping their ambition on carbon regulation as a key lever to incentivise corporate and societal progress in reducing global emissions.”

To this latter point, businesses are still awaiting clarity on the UK's post-Brexit ETS approach. 

Carbon case studies

Businesses named in CDP’s report as leaders on carbon pricing include Microsoft, Orsted and Mitsubishi Corporation.

Microsoft committed last year to reach negative emissions by 2030 and remove the company's historic emissions by 2050. Aside from increasing its internal carbon pricing to meet this aim, it has increased investments in carbon capture technologies and nature-based solutions, as well as supplier engagement.

Ørsted has already committed to reaching carbon-neutral energy generation and operations by 2025, expanding to a net-zero value chain by 2040. The firm is regularly cited as an example of leadership in the energy transition; it was formerly Danish Oil and Natural Gas (DONG) and has since shifted to become a fully renewable company.

On carbon pricing specifically, Orsted has repeatedly encouraged the EU to provide more long-term clarity on pricing under the ETS and to increase pricing levels. 

Sarah George



Tags

carbon price | Data | Emissions trading

Topics

CSR & ethics | Climate change


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