Microsoft's carbon pricing scheme: A progress report

Josh: Explain how the carbon price is determined.

TJ: We initiated the policy with a low price on carbon based on the blended cost of our current investments in clean energy, efficiency projects and carbon offset projects.

Josh: Now that we’re six months in, do you feel like the right price was set?

TJ: Yes. Our governance council provides the flexibility to allow the carbon price to grow over time to meet investment goals. The carbon price will likely increase over time as we expect the price of carbon offset projects to also increase over time. In this first year, the carbon price has proven effective at facilitating the right conversations and initiating net new carbon reduction projects across the company.

Josh: What’s been your experience working with teams across the businesses on carbon fee education and planning?

TJ: To put it in one word, inspiring. With the price in place, people are teaming up to discuss how to drive efficiencies and further invest in more clean energy. And people outside of our sustainability team are beginning to ask, “How do we work together to reduce carbon and mitigate the incremental fee?” Through the Carbon Neutral Council, we are in the process of reviewing new long-term commitments to purchase renewable energy and invest in a variety of efficiency projects.

To achieve that, we’ve purchased Green-e certified renewable energy credits to offset our projected emissions for the first half of our fiscal year and invested in select carbon offset projects in the U.S. and internationally. We’re in the process of developing a more comprehensive portfolio, so stay tuned for progress over the next few months.

Josh: One of the newer developments from our efforts to drive efficiency measures in the business was the creation of energy efficiency grants here at Microsoft. Can you explain how those efficiency grants work?

TJ: These grants, funded by the carbon fee drive collaboration and awareness across the company around prioritizing efficiency. We have extended an offer to our internal business groups to submit proposals for projects that support carbon reduction and increased efficiency. Examples might include metering, lighting retrofits, energy management programs and travel reduction. The type of projects will vary based on what makes sense for their business and geography. We will be reviewing proposals over the next couple of months.

Josh: Efficiency grants weren’t part of the carbon fee announcement last year; can you explain how those came into play?

TJ: This is the terrific part of the implementation process! The carbon fee helped start the conversation. By engaging in brainstorming and listening to feedback, we heard loud and clear from stakeholders across the company that investments that directly support business group efforts would be much more effective than simply a punitive model.

Josh: When you talk with your counterparts at other companies, how do you describe what other companies can learn from putting a price on carbon?

TJ: We don’t need to wait for legislation. We have the opportunity to take action now to help mitigate climate change by improving operational governance of our own organizations and setting an example for others to follow. As sustainability leaders, we can lead the change we are searching for today.