Businesses double down on carbon pricing while Capitol Hill idles

Businesses double down on carbon pricing while Capitol Hill idles

Putting a price on carbon is not at the top of Congress’s to-do list. The 113th Congress has made no secret of the fact that it is both unable and unwilling to reach a consensus on climate change action.

As of August 2014, legislators had introduced 221 bills focusing specifically on climate change — 134 that are meant to advance climate action, as well as 87 that would hinder it, according to the Center for Climate and Energy Solutions. Of these 221 bills, only 13 deal specifically with the issue of putting a price on carbon — and more than half of this number aim to prevent that from ever happening.

Despite the lack of a congressional consensus, there is a growing global corporate consensus that carbon will be priced, and boardrooms across the country are preparing for a robust, internationally-linked carbon market. These companies would welcome regulatory certainty, nationally and internationally, when it comes to climate change policy and carbon pricing.

According to a new report by CDP, 29 major public companies in the U.S., including Dow Chemical Company, Goldman Sachs and ExxonMobil are now incorporating an internal carbon price into their business decisions. CDP gathered the data from corporations in response to its annual request for information on the business implications of climate change.

CDP researchers first noticed the carbon pricing trend last year as they evaluated the 2013 CDP filings from companies listed in the S&P 500, in addition to similar data from global companies. In December 2013, CDP showcased this data point for the first time in a groundbreaking white paper.

Business opportunity

Critics may cling to the claim that a price on carbon would be economically deleterious, but 638 companies disclose that regulations related to carbon pricing (cap-and-trade & carbon taxes) present an opportunity for their businesses. Several businesses already use carbon pricing to guide their internal and external capital deployment to maximize return on investment.

Companies implementing carbon pricing run the industrial gamut, including utilities, energy businesses, technology companies, airlines, transportation companies and financial services firms. Wal-Mart, Walt Disney, Co. and Microsoft are some of the other notable brands to have voluntarily gone this route.

This year, ExxonMobil continues to place the highest price on carbon; it assumes a cost of $60 to $80 per metric ton by 2030. Mars prices carbon at $20 to $30 per metric ton. Microsoft’s metric is $6 to $7, Google uses $14, while Disney’s range is $10 to $20. The general rule seems to be that the longer the life of an asset, the higher the price on carbon.

As was the case last year, companies are setting their prices according to what might happen or is already happening within their areas of operation. Programs in California, for example, tend to follow the state’s cap-and-trade program’s prices of $14 to $15 per metric ton. Major companies such as Alstom, Bayer and Canadian Tire Corporation are keeping a close watch on emerging Chinese emissions trading systems that will soon be pricing carbon on a mandatory basis.

Mandatory requirements

Many major U.S. companies are participating in the European Union Emissions Trading Scheme (EU ETS) and are already operationalizing a carbon price on a mandatory basis. Some European firms, such as Lafarge and Rockwool International, want stabilization and improvement of this system, which puts a price on carbon on a mandatory basis, to help protect long-term investments and improve profitability.

In June, CDP published a paper seeking to answer questions that arose in the wake of the 2013 white paper, including:

Why are these companies using a carbon price?

How are these prices calculated, and how to do they function as internal costs?

Do carbon prices drive strategy and investment?

What are the implications of the use of these prices for investors, companies and policymakers?

Answering these questions through the voices of senior corporate leaders, the report adds depth to the data outlined in the December white paper.

Rob Bernard, Microsoft’s chief environmental strategist, said the company’s carbon fee model supports a culture of innovation and efficiency. Microsoft is promoting the efficient use of resources and purchasing renewable energy, and hopes to set an example by driving accountability through its internal carbon pricing and carbon fee model. Bernard added that Microsoft is only able to adopt this model because it benefits the overall productivity and profitability of the company.

Beth Stevens, Ph.D., Disney’s senior vice president of corporate citizenship, environment and conservation said attaching a financial value to carbon has incentivized Disney’s businesses to reduce their greenhouse gas emissions and to think creatively about new approaches and technology that will help reduce their carbon footprint. The company has seen three consecutive years of record financial performance, even after putting a price on carbon.

Many of these companies are not stopping at internal corporate reform. Some 212 businesses are directly engaging with policymakers on carbon-pricing legislation. They state that their corporate position is in support of establishing a cap-and-trade system and carbon tax. With little political will on Capitol Hill to take any kind of cohesive action against climate change — much less put a price on carbon — it may be up to these forward-looking firms to continue to lead the charge to a more sustainable economy, and world.

Top image by Ungnoi Lookjeab via Shutterstock.