Strategic Focus: Making Internal Carbon Pricing Work for Your Firm

Table of contents

Internal carbon pricing (ICP) can be an exercise in futility
Proponents apply ICP for strategic planning and risk management
Firms should take a fit-for-purpose approach to ICP mechanisms
Internal carbon fees are intended to fund decarbonization directly
Shadow pricing aims to decarbonize long-term investment decisions, but lacks teeth
Implicit carbon pricing is only useful as a baseline for the other methods
The key to effective ICP lies in its implementation

Table of figures

Figure 1. External and internal factors influencing the internal price firms apply to carbon
Figure 2. Implementation of ICP can have short- and long-term advantages
Figure 3. Generalized implementation of an internal carbon fee in a firm
Figure 4a. Case study of a firm that has implemented an internal carbon fee 
Figure 4b. Case study of a firm that has implemented an internal carbon fee 
Figure 4c. Case study of a firm that has implemented an internal carbon fee 
Figure 5. Generalized implementation of a shadow price in a firm
Figure 6a. Case study of a firm that has implemented a shadow price 
Figure 6b. Case study of a firm that has implemented a shadow price
Figure 7. Generalized implementation of an implicit carbon price in a firm
Figure 8. Case study of a firm that has implemented an implicit carbon price
Figure 9. Mapping the relevance and challenges of ICP across different organization types