Climate change major risk to business, companies begin putting price on carbon

Carbon pricing ascertains how much a company needs to pay for its emissions with a higher price meaning it needs to pollute less and acquire technology to do so
Representational Image. (File photo)
Representational Image. (File photo)
Published on Apr 22, 2021 08:59 AM IST
Copy Link
ByJayashree Nandi

Nearly half (226) of the world’s 500 biggest companies are now putting a price on carbon or planning to do so within the next two years, according to a new report by CDP (formerly Carbon Disclosure Project) that works on a global disclosure system for investors, companies, cities, states, and regions. Carbon pricing ascertains how much a company needs to pay for its emissions with a higher price meaning it needs to pollute less and acquire technology to do so.

In India, 58 companies including Infosys Limited, and Tata Consultancy Services are pricing carbon or are planning to follow suit in the next two years, the report released on Wednesday said, highlighting a gradual transitioning towards low-carbon investment.

Energy efficiency, changing internal behaviour, identifying and seizing low-carbon opportunities, and greenhouse gas regulations, which may be introduced, are the reasons companies have cited for internal carbon pricing.

Experts said carbon pricing could impact low-income communities disproportionately and that systemic changes are required to bring down overall emissions from industry.

A majority of the companies are from the carbon-intensive sectors like chemicals, cement and concrete, information technology, and software development. The internal carbon price disclosed by these companies ranges from US$10 to US$50.11 with a median price of US$25 per metric ton of carbon dioxide equivalent.

Damandeep Singh, director, CDP India, said integrating an internal carbon price into a climate strategy can help a business factor in climate risks while preparing for greater reductions in their carbon emissions. “CDP has been collecting corporate data on the use of carbon pricing since 2014, and by 2020, 58 Indian companies are either pricing carbon or planning to do so in the next two years,” said Singh in a statement.

Also Read | All countries should phase out coal by 2040, says United Nations chief

“As we prepare to ‘Build Back Better’ from Covid 19 and transition to a low-carbon economy, Indian companies must start pricing carbon risks to reduce costs, guide capital investment decisions and prepare for inevitable regulatory changes.”

CDP said with more countries bringing in carbon pricing regulation, and carbon prices soaring to all-time highs in the EU emissions trading scheme this year (rising to over €40 / US$44.80 in March), corporations need to up the carbon prices they are currently accounting for internally.

Companies mainly use internal carbon prices to address current or future regulations that could increase the cost of emissions and have a big financial impact on their businesses. Sixty-four carbon pricing initiatives are currently in place or scheduled by governments and regulators, up from 61 in 2019.

Harjeet Singh, ActionAid’s global lead on climate, said the increasing number of corporations adopting carbon pricing indicates how businesses see climate change as a real threat. “However, if the added cost is passed on to the consumer, carbon pricing can be a blunt tool that disproportionately affects low-income communities and may be insufficient to drive the real systemic change that is needed to avert runaway climate breakdown.”

CDP’s findings are significant as the UN is pushing for a global coalition committed to net zero emissions by 2050 covering all countries, cities, regions, and businesses. Antonio Guterres, the UN secretary-general, on Monday called on Organisation for Economic Cooperation and Development (OECD) countries to phase out coal by 2030, and 2040 elsewhere.

“We know that to avert the worst impacts of climate change, we must keep global temperatures to within 1.5 degree C of the pre-industrial baseline. That means reducing global greenhouse gas emissions by 45% from 2010 levels by 2030 and reaching net-zero emissions by 2050. The global mean temperature for 2020 was around 1.2 degree C warmer than pre-industrial times, meaning that time is fast running out to meet the goals of the Paris Agreement,” Guterres wrote in the World Meteorological Department’s State of Global Climate 2020 report.

The US will convene a Virtual Leaders’ Summit on Climate on Thursday and Friday, where 40 world leaders including Prime Minister Narendra Modi are likely to speak. Guterres said he expects the most important countries in relation to climate change to commit to net-zero emissions of greenhouse gases by the middle of the century and to commit to a drastic reduction of emissions for the next decade by reviewing their Nationally Determined Contributions at the US summit.

Also Read | UK to toughen climate target before US President Joe Biden’s summit: Reports

Another analysis released by Delhi-based climate communications organisation Climate Trends on Wednesday said Indian states and companies that cumulatively operate 50% of installed power generation capacity in India are committed to not building new coal power plants.

NTPC, India’s largest government-owned power company that owns over 25% of total installed coal capacity, is committed to not building any new greenfield coal power plants. Similarly, Tata Power, India’s largest private power company, has made a similar commitment. Gujarat, Chhattisgarh, Maharashtra, and Karnataka have also committed to no new coal policy. Collectively, the states and the companies make up 50% of India’s total installed power generating capacity, the analysis said.

“Renewable energy is deflationary, with costs for setting up solar PV projects dropping by more than 80% in India between 2010 and 2020. The price of renewable energy is 30-40% lower than the domestic coal-based capacity and 50% lower than the imported coal-based capacity,” said Vibhuti Garg, energy economist, Institute of Energy Economics and Financial Analysis, in a statement on the Climate Trends analysis.

SHARE THIS ARTICLE ON
Close Story
SHARE
Story Saved
×
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, May 20, 2022