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Business leaders support a price on carbon

Hydrocarbon Engineering,

A feature published on the World Bank website suggests that business leaders understand that climate change can have real economic impact, and that their current business models may not be profitable in a 4°C warmer world.

Several global companies, including Google, Walmart and Shell, have started using an internal ‘shadow price’ on CO2 emissions in their investment planning to help avoid risks and find opportunities that can increase energy and resource efficiency, reduce CO2 emissions and give them a competitive edge.

In approximately 40 countries and more than 20 cities, states and provinces, these companies and others also work with a formal price on emissions that is set for whole sectors or economies through carbon taxes or cap-and-trade. According to the World Bank, business leaders are increasingly speaking out in favour of expanding those carbon pricing policies.

More than 250 companies have already joined a statement that is being organised by the World Bank Group and partners including the World Economic Forum, UN Global Compact, and the Price of Wale’s Corporate Leaders Group encouraging governments to explore carbon pricing methods and set their own predictable price on carbon.


For investors, transparency and sustainability are important. A price on carbon helps bring to light the risk of stranded assets and connects the damages caused by burning fossil fuels to their sources, costs that are rarely reflected in stock prices today.

The French public service pension fund ERAFP proposes that companies report their carbon footprint as a proxy to assess how businesses are preparing to deal with climate change.

“Assuming that, as a result, it would be in the interest of any company to gross the highest revenue possible for the least carbon footprint, pressure would increase for the subsequent overhaul in corporate business models”, ERAFP wrote in supporting the price on carbon statement. “We will never stress enough the importance of being transparent”.

Small businesses

According to the World Bank, small businesses are also concerned about climate change; they have fewer resources to endure extreme weather events, recover or adapt. The American Sustainable Business Council (ASBC) works with small businesses and sees value in properly pricing the burning of fossil fuels and using the proceeds to reduce taxes elsewhere.

“By returning some of the revenues to the lowest income earners, a price on carbon actually benefits small businesses that serve this segment of consumers”, according to the ASBC. “Addressing the climate crisis will not just avert economic catastrophe, it can serve as a wellspring of innovation, job creation, and produce economic and international competitive benefits”.

A similar model has been used in British Columbia since 2008. The Canadian province set a tax on emissions from fossil fuels – paid at the pump and in energy bills – but then cut business taxes and personal taxes and added a low-income tax credit to protect the poor. The revenue-neutral approach led to one of the lowest income tax rates in Canada and lowered the province’s emissions.

Private sector involvement matters

According to the World Bank Group, the private sector’s involvement in encouraging a price on carbon is essential. Climate change threatens to roll back decades of development progress in countries around the world and puts the poorest and most vulnerable at greatest risk. Public money alone will not be enough to shift the world to low-carbon growth that can reduce emissions to safer levels.

In joining the carbon policy statement, Unilever said: “Many of the impacts of our operations fall outside our direct control, so we need to engage governments to create an environment that is supportive to meeting the big sustainability challenges the world faces”.

Adapted from a World Bank feature by Emma McAleavey.

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