Big corporates leading the way on climate change with carbon pricing

The progressive corporate sector plans to make a major push at next week’s climate change summit in New York for the introduction of a meaningful global price for carbon, believing it to be one of the most effective measures to keep temperature rises within 2C.

The World Bank is also taking a lead on carbon pricing and will unveil a long list of states, regions and businesses announcing plans to factor in the costs of burning fossil fuels. It will essentially say that when carbon emissions carry a price, that cost creates an incentive for businesses to reduce waste and invest in energy efficiency and cleaner power sources.

But what are companies doing to lobby for change and how prepared are they for the introduction of a global carbon market?

CDP, the sustainable-economy non-profit, has compiled the first global database which shows that the world’s largest corporations are outpacing their governments in responding to climate change and expect carbon to be priced.

Its analysis shows that 150 major companies, including 29 in the US and 24 in the UK, already use an internal price on carbon and more than 200 businesses, or around 10% of the largest companies surveyed, are directly engaging policymakers in support of carbon-pricing legislation.

The report concludes that “these companies want, and are calling for, clear pricing and regulatory certainty to help them plan their climate-related investments, and they want to see more certain, internationally linked carbon markets.”

Of the 2,100 companies surveyed, 638 say they recognise that carbon regulation presents business opportunities while nearly 500 report that they are already regulated and price carbon through global carbon markets. Nearly a fifth of these are US companies.

Global companies which have bases in China and Korea, including Alstom, Bayer and Canadian Tire Corporation, say they are closely monitoring the emerging Chinese emissions trading systems that will soon make carbon pricing mandatory.

The report also shows that uncertainty about the future means companies are pricing carbon at very different levels. While Microsoft prices it at $6-$7 a tonne of carbon, UK utilities company Pennon Group gives a spread of $84.24- $324.00. Pennon says it uses the UK government’s carbon shadow pricing to monetise carbon emissions over the whole life of proposed projects.

There is also a wide divergence between energy companies with the Cairn Energy using a figure of $30, while BP uses $40 and Exxon at the top end with $60-$80.

Nigel Topping, CDP’s executive director, says the reason for the broad spectrum of prices is that policy uncertainty means companies are having to use scenario planning and guesswork. As a result, businesses are less prepared to invest in emissions reductions, especially when the payback is over the longer-term

Topping says action is essential given that current initiatives such as the European trading scheme and California’s cap and trade programme price carbon so low, with EU permits currently trading at around €6.50 per tonne. A carbon pricing scheme in Australia, which was introduced in 2012 was repealed just two years later.

Several European companies such as Lafarge and Rockwool International, which are covered by the European scheme told CDP they want to see the system stabilise and improve to help protect long-term investments and improve profitability.

CDP found the greatest surprise from its study was how little policy makers were aware of the carbon pricing already taking place within corporations, and the relatively high price being used by oil companies such as Exxon Mobil.

He said: “What this data shows policymakers is that there is a large groundswell of support from the business community to put a sensible price on carbon that will actually lead to significant emissions reductions. This hopefully will give them the confidence to act.

“We also hope it will make it easier for other businesses to think about introducing their own carbon pricing as well as pushing for regulatory change so that we can create a level playing field across the world.”

Topping says that businesses meeting in New York will not just be calling on governments to act but will also start getting into the detail of agreeing the type of policy changes they would like to see and a meaningful price for carbon.

• This article was amended on 22 September to remove reference toUK’s BG Group using a carbon price of $19.90. This was an incorrect reference in the CDP report which has now been removed.
  
  

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