Internal CO2 Price

The internal carbon price is a monetary value that companies apply to their own emissions to promote sustainable decisions.

An internal carbon price is a monetary value individually set by companies, applied to their own greenhouse gas emissions. The goal of this approach is to integrate the costs of emissions into business decisions to promote emissions reductions and manage climate-related risks. Implementing an internal carbon price serves as a strategic tool that helps companies prioritize low-emission alternatives in their investment and business decisions, and prepare for future regulatory requirements.

The internal carbon price can take various forms. A common method is the shadow price, where a hypothetical price for carbon emissions is incorporated into decision-making processes without actually moving financial resources. Alternatively, companies can impose an internal carbon fee, where departments contribute a real amount based on their emissions, which is then used for climate protection measures. Another mechanism is the implicit carbon price, based on the actual costs for emissions reduction measures.

To determine the level of the internal carbon price, companies refer to various factors such as the social costs of carbon, regulatory developments, and market benchmarks. Often, they consciously set higher prices to achieve ambitious climate goals and promote innovation. The internal carbon price applies to all emission sources within the company, including direct and indirect emissions, making it a crucial instrument for integrating sustainability strategies into corporate governance.