Tracking Carbon Emissions

Many companies are protecting themselves against “climate risk”—the damage they might suffer from heat waves, flooding, and other effects of global climate change. But the smartest companies are also paying attention to “carbon risk”—the costs they will have to bear as governmental policies extract a growing price for CO2 emissions. These firms are setting internal carbon prices (ICPs), putting a monetary value on their own emissions to better prepare for success in a lower-carbon world.

As global weather becomes more extreme, the threat that climate change poses for companies is no longer theoretical. Businesses are working to protect their assets and supply chains from increasingly severe hurricanes, heat waves, fires, and droughts. More and more companies are figuring such “climate risk” into their calculations, and investors are paying close attention. But there is a related threat that many haven’t fully taken in: carbon risk—the impact of climate-change policies on a company’s strategy and returns. As global warming worsens, companies can expect tougher government measures that will extract a growing price for their carbon emissions. These mechanisms could sideline the unprepared. In this article we describe the approach used by more and more companies to brace for the future and even flourish in it: internal carbon pricing. At its core, this involves setting a monetary value on the company’s own emissions that reflects carbon prices outside the firm. In 2017 nearly 1,400 companies were actively using internal carbon pricing or planning to do so. As we’ll show, by putting their own price on carbon, companies can better evaluate investments, manage risk, and forge strategy.

Taking into account of increasing carbon emissions, we want to bring down the emission by tracking and analyzing them, not only in the form of general aspect but also in terms of technical aspect through various sources of information such as how much tons of emissions are happening through the energy generation and energy consumption, how different scopes across different sectors and industries are affecting the carbon emissions and how much of the renewable energy is being used across the industry to reduce emissions.

This solution/dashboard explains the process firms go through: measuring their direct and indirect emissions, ascertaining current external carbon prices (both explicit and implicit), predicting future ones, deciding what time horizons their ICPs should cover, and considering emissions-reduction goals. The authors then discuss how internal carbon pricing is helping companies make decisions about new investments, manage financial and regulatory risks, and develop long-term strategy.