As concerns over climate change continue to grow, governments and businesses around the world are exploring ways to reduce greenhouse gas emissions. One tool that has gained increasing attention in recent years is the concept of carbon pricing, an economic incentive for companies to lower their emissions. In this article, we will explore what carbon pricing is and why it matters.
Carbon pricing is an approach to reducing greenhouse gas emissions by placing a fee on emitting or offering an incentive for emitting less. A key aspect of carbon pricing is the “polluter pays” principle, which holds emitters accountable for the grave impacts of adding GHG emissions to the atmosphere, including increased temperatures, heightened risk of extreme weather events, polluted air, and threats to public health, food, and water supplies. By placing a price on carbon, financial incentives can be created to motivate polluters to lower their emissions. The objective is to discourage the use of carbon dioxide, protect the environment, address the underlying causes of climate change, and comply with global and domestic climate agreements. Appropriately structured carbon pricing mechanisms offer triple benefits: they protect the environment, drive investments in clean technologies, and generate revenue.
To stay aligned with the Paris Agreement of reducing carbon emissions and keeping the global temperature rise to way below 2 degrees Celsius, the IPCC (Intergovernmental Panel on Climate Change) has concluded that the world must achieve net-zero emissions before the end of this century. That means we need to take action now and carbon pricing is an essential part of the solution. Companies would need to set an internal carbon price between $40 to $80 per metric ton to achieve this goal. This target allows organizations to place a monetary value on carbon risk and begin mitigating it before regulations are introduced. According to the CDP, more than 2,000 of the world’s largest companies are already using an internal carbon price as a risk management tool. To prepare for regulatory carbon pricing, it’s a good idea to implement an internal carbon price for your organization today.
Avarni’s carbon emissions management platform enables real-time emission tracking and allows you to set your own carbon price, allowing your finance team to monitor the organization's proximity to its carbon limit and its monetary liability if exceeded. This enables stakeholders to easily track progress toward their carbon limits on a monthly, quarterly, and annual basis, which will be required once regulations are mandated. If you want to ensure that your organization is prepared for mandatory carbon pricing and join the thousands of companies already proactively pricing their emissions internally, schedule a call with us.