According to the GIVE model with a 2% discount rate
What is an internal carbon price?
An internal carbon price is a fee that companies voluntarily charge themselves for their greenhouse gas emissions. This helps them incentivize and fund emissions reductions. It is distinct from the price of carbon credits, which represent a market-based mechanism for offsetting emissions.
How Microsoft implemented an internal carbon price
Microsoft implemented an internal carbon price in July 2012, charging different divisions in the business different prices per ton of carbon emitted. For example $15 for emissions related to electricity use, $100 for business travel and $8 for all other emissions. The company has committed to becoming carbon negative—meaning, they will reduce their carbon emissions deeply and remove more carbon than they emit—by the year 2030. By 2050, their goal is to remove from the environment all the carbon the company has emitted since it was founded in 1975.
Berkeley-RFF Greenhouse Gas Impact Value Estimator (GIVE)
2% Discount Rate
$18500 per CO2 Ton
$7500 per CO2 Ton
$2500per CO2 Ton
High-Level Commission on Carbon Prices
$4000 to $8000per CO2 Ton
$1233per CO2 Ton
What is the purpose of a carbon price?
A carbon price is a monetary value placed on the amount of carbon dioxide emissions produced by an organization. The purpose of setting a carbon price is to incentivize companies to reduce their carbon footprint and transition towards more sustainable practices. By putting a price on their emissions, companies are encouraged to invest in clean energy, energy efficiency and other measures to lower their carbon emissions.
Common types of carbon prices include carbon taxes, cap-and-trade systems, and internal pricing. Carbon taxes are government fees on carbon content. Cap-and-trade limits emissions and allows for buying/selling emission allowances. Internal pricing, a shadow price or fee, is self-imposed by companies to reflect the cost of emissions on the environment and simulate future regulations.
Internal Carbon Fee and Shadow Price are two methods for setting a carbon price within an organization. An Internal Fee is a revenue generating fee charged internally within the company for emissions from their operations, while a Shadow Price is a theoretical carbon price that is used to estimate the future cost of carbon regulations and help with decision making.
The Social Cost of Carbon (SCC) measures the economic damage from each ton of CO2 emissions. It factors in impacts to human health and property damage from climate change. The SCC helps with decision-making and can serve as a basis for carbon pricing. By using the SCC in their pricing, companies can account for the real cost of emissions and make better decisions for both business and the environment.
Carbon pricing can be expressed in two ways: “money for ton” refers to the damage costs related to each ton of carbon emissions, while “ton for ton” refers to the cost of offsetting each ton of emissions. “Money for ton” uses the concept of Social Cost of Carbon to derive the damage each ton of CO2 produces. It is the recommended approach since it incentivizes organizations to reduce emissions by pricing in their real costs.
Implementing a carbon price starts with tracking emissions, setting clear goals and understanding the factors that impact your footprint and climate and regulatory risks. Then, choose a pricing method that aligns with your goals and ensure robust data management and reporting. Finally, engage stakeholders and communicate the impact of your carbon pricing program