“The future will not be the same as the past.” This was one of the first phrases used to describe the current moment of transition to a low-carbon economy. In a joint effort between the Carbon Disclosure Project (CDP), the Business Council for Sustainable Development (CEBDS), We Mean Business and technical support from WayCarbon, the entities promoted a workshop in São Paulo to address carbon pricing and its importance in fostering measures to drastically reduce carbon emissions in different sectors.
Currently, more than 40 jurisdictions around the world already have a carbon pricing mechanism, either through taxation or an emissions trading system. Aware of this scenario, many companies are voluntarily setting prices for their carbon emissions in order to anticipate regulation and prepare for the low-carbon economy, a practice known as internal carbon pricing. According to Nicolette Bartlett, CDP's carbon pricing lead, from 2004 to 2016, the number of companies reporting the adoption of an internal carbon price grew from 150 to 1,200, which already expresses a great global concern in developing measures that achieve the goals of reducing the impact of climate change. Furthermore, the report “Embedding a carbon price into business strategy”, prepared by CDP, shows that this year Brazil increased by 74% the number of companies that use or plan to use internal carbon pricing.
“Carbon pricing is an economically efficient mechanism to promote the urgent reduction in emissions that we seek. The business sector needs to be engaged to ensure that this happens in the most efficient way possible,” said CEBDS technical advisor Lilia Caiado, who, during the workshop, presented the Business Initiative on Climate (IEC). In Brazil, the IEC has been working to implement carbon pricing mechanisms and, in September of this year, released a position statement defending a methodology for this. The IEC is made up of CEBDS, CDP, Envolverde, GVCes, Instituto Ethos and Rede Brasil do Pacto da Nações Unidas Global.
Through debates and presentations with representatives from institutions such as the World Bank, Itaú Asset Management, and Latam, with mediation by CDP, the global pricing scenario was discussed, as well as examples of companies, such as Latam, that have dealt with the imminent change of their sector to a low-carbon model. “Aviation is a sector that will be greatly impacted. The final solution will be alternative fuel, such as biojet kerosene,” says Sarita Severien, from Latam’s institutional relations and sustainability department. The Latam representative also addressed initiatives that are already underway, such as the one developed by ICAO, Carbon Neutral Growth, which already has concrete goals for all countries to fly carbon neutrally by 2020, that is, neutralizing carbon emissions.
Regarding investors, Alexandre Gazzotti, SRI analyst at Itaú Asset Management, reinforces: “Investors who are focused on long-term results take into account the carbon pricing factor”. Alexandre Kossoy, financial specialist at the World Bank’s Carbon Finance Unit, highlights: “China is already one of the countries that reduces carbon emissions the most, around 1 billion tons, in just seven pilot cities”.
To prepare companies for the regulations that are expected to come into force before 2020, GVces has introduced a tool that simulates an emissions trading system and reinforced measures that favor a corporate environment capable of adopting internal carbon pricing:
– The decision must be worked on together with the companies’ Senior Management, engaging this audience so that they understand the needs and benefits of the initiative;
– The company must involve the Sustainability, Risk and Financial areas, as they are part of the decision-making process;
– Training employees to carry out projects that prioritize carbon pricing;
– In addition, the meeting discussed the difficulties of developing regulatory policies, positions and also developed practical action plans to initiate the process within companies.
The workshop carried out two practical exercises with the participants. The first exercise simulated the allocation of emission permits among companies in the electricity sector in a carbon market in a fictitious country. The other exercise worked on carbon pricing within companies, so that they would understand what should be done to measure their abatement costs.
CEBDS and CDP are preparing to launch the Advanced Carbon Pricing Guide in 2017. Stay tuned, the Guide will soon be available on the CEBDS website.
