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Carbon: A Price Worth Fixing
By Michael Schweibinz

A new white paper by CDP North America reports that numerous U.S.-based companies have begun to integrate an “internal carbon price” as a new measure and driver of long-term business strategy. Whether for competitive advantage, risk management, or to identify new revenue possibilities, companies like WalmartWalt Disney, and Microsoft have gone public with information about establishing a price for carbon for planning purposes.

Several energy companies are anticipating stricter climate change regulations at the state and/or federal levels in the near future. Those who have already analyzed these costs are likely to be better prepared for the future, rather than playing catch-up like many of their competitors. Pricing carbon, if only for internal strategic planning purposes, could prove to be a significant advantage in a low carbon future.

So how does one go about putting a price on their carbon footprint? The industry standard is for companies to calculate a dollar amount per metric ton of C02e. Typically, assets with longer lives tend to have higher carbon prices. CDP found that “internal carbon prices,” or the “shadow prices,” ranged from $6 to $60 per metric ton. Of the 29 carbon pricing schemes disclosed in the report, Microsoft had the lowest shadow price, while Exxon Mobile topped the charts at with $60 per metric ton.

Having an internal carbon price determined for the future is a no-brainer for Jack Ihle, director for environmental and public policy at Xcel Energy. He claims, “Given the capital-intensive nature of our business, we must make decisions over long-term horizons and take steps today to plan for potential future outcomes, such as climate change regulation… By so doing, we believe we can reduce both the costs and risks associated with potential new environmental mandates.”

 

At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?

Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.

 

Posted: February 19, 2014