Does Every Carbon Price Make You Pay in Reality?

    Bloomberg News reports that Europe’s carbon price was at an all-time high in mid-August, registering the figure as just above 99 euros for a ton of carbon dioxide emissions. Since then, it has dropped. But for the cap-and-trade market of the EU, which was introduced way back in 2005, this was a watershed.

    Under this program, companies can trade allowances for the tons of carbon dioxide they emit. As such, the higher the cost, the more incentive they earn for having cut emissions of planet-warming gas.

    Many other carbon markets across the globe are quite significant. Also, as many as 2000 plus companies have or already have set plans for the so-called “internal carbon prices.” This eventually imposes a monetary value on their emissions of their while at the same time forming a part of their decarbonization strategy. In government-led markets and corporations, not every cost will significantly impact the emissions, implying that not all carbon prices must compel you to shell out cash.

    Varying costs and varying effects

    It is seen that shadow prices are much more common. As many as 500 companies, including some big gas, oil, and resource companies like BP Plc, BHP Group Ltd., and Shell Plc, use the shadow prices. The shadow prices do not use the actual exchange of the internal funds. These are risk assessment tools that require the need for anticipation of different pricing regimes and policies since they operate in different jurisdictions.

    Other internal price mechanisms are available as well. Implicit calculations of the prices are done based on past investment costs that have managed to reduce emissions or were compelled to adhere to the climate regulations.

    In the longer term, more activity, decarbonization strategies, and scrutiny at every level is a must and a good thing.


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