Publication / 17 Jan 2018

Carbon Pricing: Discover Your Blind Spots on Risk and Opportunity

Understanding carbon pricing risk exposure is essential to managing business risk and building resilience to intensifying global climate policies.

Following commitments under the Paris Agreement to limit global warming to 2 degrees Celsius, governments are increasingly imposing a price on carbon, shifting the cost of greenhouse gas (GHG) emissions from society to the source of pollution.

Pricing carbon provides an incentive to reduce GHG emissions and invest in low-carbon technologies. While current carbon prices average around USD 40/tCO2, they are expected to increase in the near future, reaching up to USD 120/tCO2 by 2030 in Organisation for Economic Co-operation and Development (OECD) countries under a 2 degrees Celsius-aligned scenario.

The growing carbon price could affect companies directly with regulatory costs imposed on their operations through energy and fuel price increases, or indirectly through costs passed on by suppliers. These costs may be borne by companies or passed on to consumers in the form of higher prices. Rising prices, along with the increased cost of using carbon-intensive products such as motor vehicles, may depress consumer demand.

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