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How Major Multi-Nationals Cut Emissions, Save Money by Embedding Carbon Pricing into Business Strategies

cdp-carbon-pricing-reportGlobal environmental services company Suez uses an internal carbon price to drive investment in low-carbon technologies such as energy-efficient water pumps.

Meanwhile IT giant Microsoft used its carbon fee fund to support, among other low-carbon projects. The fee, paid by business units across the company, funds internal efficiency upgrades, power purchase agreements and green power instruments, carbon offset projects, and supply chain engagement. It also saves Microsoft more than $10 million per year.

These are two examples of how a growing number of multi-national companies are using internal carbon pricing to invest in low-carbon technologies and product offerings while also saving money, according to research by climate change disclosure nonprofit CDP.

The report, released at Climate Week 2016 in New York City, says more than 1,200 companies — a 23 percent increase from 2015 — disclose to CDP that they either plan to or currently place an internal price on carbon. Of these, more than 140 are taking carbon pricing one step further and embedding the practice within their business strategies and operations.

Nissan, for example, uses an internal price on carbon in its capital allocation process. “GHG emissions reduction is one of the most crucial parameters in Nissan’s investment plan selection process. Proposals are compared and selected based on carbon emissions reduction per unit cost of investment, as well as the energy reduction potential, measured with an internal price of carbon,” the automaker disclosed to CDP’s climate questionnaire.

French banking group Societe Generale, which implemented an internal carbon tax in 2011, says it uses the fee to fund 119 internal environmental initiatives such as green building and waste reduction. Over three years these projects have saved EUR 13 million on overhead annually and 4,700 metric tones per year of CO2 equivalent.

“Internal carbon pricing is a way of seeing things that are otherwise hidden in business terms of dollars and sense,” CDP special advisor Paula DiPerna said in an interview. “High carbon is a very dark cave and the business benefit of using a carbon price is you have an illumination of the future, you illuminate the high cost of high carbon and the hidden benefits of low carbon. Every kind of emission, regardless of the source, is carrying a hidden cost that can be in terms of risk, mitigation, higher insurance premiums, whatever. So if you can eliminate that cost, you have a significant business benefit.”

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