Internal carbon pricing
A growing corporate practice
In the Paris Agreement, signed in December 2015, the international community set itself the ambitious goal of achieving zero net emission before the end of the century, in order to comply with the average global warming cap of 2°C or less, if possible. The transition towards this low-carbon world means rapidly reinventing development in every field, including energy, transport, housing, production, farming, finance and consumption.
Most actors agree that assigning a price to greenhouse gas emissions has an influence on their decisions and is an effective means of encouraging economic decision-makers to invest in clean energy, low-carbon technologies and even in different products and services that meet the same requirements.
What is internal carbon pricing?
Companies are conscious of the risks relating to climate change and the need to transition to a low-carbon economy. They are also aware of the effectiveness of carbon pricing mechanisms and the important role that they have to play in decarbonisation. As a result, they pay close attention to this trend and are even making an active contribution to it, which is reflected in the development of voluntary pricing tools.
An internal carbon price is a value that companies voluntarily set for themselves, in order to internalise the economic cost of their greenhouse gas emissions. It can be used both as risk management tool and as part of a company’s decarbonisation strategy. An internal carbon price can help companies enhance their global strategies to become more resilient to regulatory climate policies and more favourable to emission reductions.
How to adopt this approach
Many companies, including those that are members of Entreprises pour l’Environnement, have embarked on this approach in order to effectively reduce their emissions, show their commitment to a low-carbon economy and protect themselves against the risks posed by this transition. Based on their experience in this area, this publication proposes a methodological approach to implementing an internal carbon pricing programme.