Pricing Carbon “New Normal” Globally For Companies, Says CDP
Putting a price on carbon is globally becoming the new normal for major companies according to a new report from CDP, with almost 1,400 companies factoring an internal price on carbon into their forward-looking business plans.
CDP (formerly the Carbon Disclosure Project) published new research this week which reveals that 1,389 companies disclosing their plans or current practices to CDP are putting a price on carbon emissions “because they understand that carbon risk management is a business imperative.” This represents an increase of 11% over the number of companies putting a price on carbon in 2016, and a phenomenal increase from the only 150 companies doing so in 2014.
Further, the disclosing companies include 100 Fortune Global 500 companies with collective annual revenues of $7 trillion.
Even more importantly is the fact that three quarters of the energy and utilities sectors’ market cap is currently pricing carbon internally — including big-name companies such as National Grid, EDF, Exelon Corporation, PG&E Corporation, and E.ON SE.
“Carbon pricing makes the invisible, visible,” said Paul Simpson, CEO of CDP. “We’re seeing a significant rise over last year in the use of companies pricing their own carbon pollution in China, Mexico, Japan, Canada and the US. Changing regulation is working on a global scale and in all regions we are seeing many businesses fast track the low carbon transition into their business plans.
“The Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures’ recommendations, Carbon Pricing Corridors, and Science Based Targets initiatives are driving greater transparency, information and governance. With this comes better management of risk and tracking of progress to a well below 2-degree world.”
Number of companies using / planning to use an internal price on carbon by region:
| Country | 2017 total number of companies* | 2016 total | Percent increase |
| Canada | 60 | 47 | 28% |
| China | 102 | 73 | 40% |
| Japan | 129 | 104 | 24% |
| Mexico | 44 | 26 | 69% |
| USA | 238 | 210 | 13% |
*These are the total number of companies already using an internal carbon price, or planning to use one by 2019
As can be seen in the table above, China has been ramping up the number of companies putting a price on carbon, nearly doubling from 54 to 102 between 2015 and 2016. Companies such as China Vanke, Shanghai Electric, and China Mobile are among the companies making the move. Other countries and regions recording an increase in the number of companies putting a price on carbon include Canada and Korea, and Latin America.
“The key question for investors should be: how can we know that companies are actually factoring environmental risk into their mainstream business strategies?” said Mark Lewis, Managing Director, Head of European Utilities Equity Research, Barclays; Member of the Task Force on Climate-related Financial Disclosure.
“Pricing carbon should play a vital role in helping companies do this — the price level, while important, is not the only key aspect. There needs to be more transparency as to how a company actually uses the price and whether it is seen as an important part of business decision-making and forecasting. It is exciting to see CDP’s disclosure platform aligning itself with the Task Force’s recommendations and to see the tracking of internal carbon pricing develop even further. It is an area that analysts in the investment world will watch with interest.”
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