CAPGEMINI

CARBON
PRICING
For a cleaner business model
Contents
Topics to Discuss
Carbon Pricing
Why is Internal Carbon Pricing Vital?
Benefits of Carbon Pricing
Types of Carbon Pricing
Peer Benchmarking

Carbon Pricing
 Carbon pricing is a mechanism to shift the burden for

Carbon Pricing the damage caused.

The conscious avoidance of It is used to quantify the organization's emissions

exploiting natural resources through a monetary value.

This allows to curb down on their carbon emissions in

order to reduce the amount paid as carbon price

Carbon Pricing
 COST OF EMISSIONS IS CONSIDERED

Why is Internal While arriving at a decision, its environmental impacts

Carbon Pricing
are also considered

ENCOURAGE ENERGY EFFICIENCY

Vital? Energy efficiency measures are very much necessary

while determining the carbon price hence enhanced
energy efficiency is promoted in order to ensure lesser
internal price

ENCOURAGES FLEXIBILITY TO REDUCE

EMISSIONS
Any organization can focus on any of the aspects like
energy related emissions, scope 3 emissions, etc to
reduce its carbon cost

Sustainable Architecture
Carbon Pricing
Primer
 BENEFITS OF CARBON PRICING

Economic and Climate Benefits Promotion of Sustainable

Cleaner technology will not only benefit the Development Goals
environment but also result in savings through Since it channels the financing of greener
reduced carbon cost. projects

Boost Investment in clean

Better Image of the
technology
Organization
It helps to increase investment in cleaner
The Brand image of the organization as a
technology and better ways to reduce
whole is enhanced because of this.
emissions

Sustainable Architecture
Carbon Pricing
Primer
TYPES OF CARBON
PRICING
GREEN BUILDING MARKET IN THE U.S.

Carbon Pricing
 SHADOW PRICING
This type of pricing is done by comparing the price with
peers and competitors and setting a price on par with
their price without considering the costs involved in our
own business.

IMPLICIT PRICING
This involves thorough calculations by considering various
measures and various costs that went into reducing the
emissions of the company and arriving at the carbon
price by calculating the weighted average of all those
costs.

Sustainable Architecture
Carbon Pricing
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 PEER
BENCHMARKING
OF CARBON PRICING

Carbon Pricing
$30 / ton of Carbon Includes only scope 3
Primary focus on air travel
di oxide emissions
Expansion to hotel
Single price regardless of
location

Sustainable Architecture
Carbon Pricing
Primer
 $50.11 / ton of Used for environmental valuation of Focus on scope 1, 2
carbon di oxide impacts from carbon emission operation and 3 emissions
Overall natural capital cost as percent of
revenue was 2.45% as percentage of
profit

Sustainable Architecture
Carbon Pricing
Primer
$13.87 / ton of Carbon price as a strong business Focus on Scope 1 &
carbon di oxide case for low carbon investment 2 emissions only
(India only) Used majorly for energy efficiency
projects to compare the return on
the investments

Sustainable Architecture
Carbon Pricing
Primer
$14.52 / ton of Change in internal behaviour Scope 1, 2 and 3
Carbon Di Oxide Drive energy efficient operations emissions
(India only) Identify seize low carbon opportunity

Sustainable Architecture
Carbon Pricing
Primer
INFERENCES FROM PEERS

Transition to energy Air Travel Prices to be Implicit Pricing is a Carbon Pricing should
efficient operations considered in evaluation better option to for be a medium to utilize
of the overall prices carbon price the low carbon
determination since it opportunities in business
allows to consider all our while arriving at
operations and various decisions
business activities while
determining the price

Sustainable Architecture
Carbon Pricing
Primer
 WHICH METHOD TO
CHOOSE?

Implicit pricing is the better method to choose

since shadow pricing blatantly just looks at the
peer price and implements the same price without
considering our business. As our business expands
and we venture into greener methods of business,
it shall have a direct impact on Carbon Price as well.
 CALCULATING
IMPLICIT CARBON
PRICE

VARIOUS COMPONENTS OF
IMPLICIT PRICE

RENEWABLE COST OF BUILDING ENERGY

ENERGY RENEWABLE HEATING AND EFFICIENCY
PURCHASED ENERGY RENOVATION EQUIPMENT
Renewable energy CERTIFICATES COST COST
purchased to curb the Energy certificated Renovation cost Cost of energy efficiency
emissions from purchased in the year by undertaken to improve equipments in a
conventional energy capgemini energy efficiency. building

Sustainable Architecture
Carbon Pricing
Primer
METHODOLOGY
FOLLOWED
The Methodology followed in calculcating the Implicit
Carbon Price

Weighted average is taken for the costs components

discussed in the previous slides. The weight of the each
component is decided by the percentage of their emission
contribution to the environment which is mentioned in the
next slide.

Sustainable Architecture
Carbon Pricing
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EMISSION PERCENTAGE IN AN IT
COMPANY
EMISSION SOURCE PERCENTAGE

Energy 25%

Buildings 6%

Lighting and
10%
other equipments

Heating 25%

Sustainable Architecture
Carbon Pricing
Primer
VARIOUS COMPONENTS OF
IMPLICIT PRICE
METHODS OF ELIMINATING EMISSIONS COST

Renewable Energy $190.7 / MWh

Renewable Energy Certificates $9.75 / MWh

Renovation of building for better

$785 / ton of CO2 eliminated
ventilation

Energy efficient Lighting and other

$766 / ton of CO2 eliminated
equipment

Heating $66.35 / ton of heat produced

Sustainable Architecture
Carbon Pricing
Primer
FORMULA
IMPLICIT CARBON PRICING FORMULA

WEIGHTED AVERAGE METHOD IS USED HERE

Hence the carbon price shall be given by the following calculation.

Carbon Price = 190.7 *0.25 +9.75 * 0.25 + 785 *0.06 + 776 * 0.1 + 66.35 * 0.25
5
= $38.25 / ton of carbon

Hence Carbon Price is $38.25 per ton of carbon produced

Carbon Pricing
HOW CAN IT BE
APPLIED?
ACCURATE TRACKING OF EMISSION
First step here is to ensure accurate tracking of emissions
from various business units and processes

CHARGED INDIVIDUALLY FROM EACH BU

Then the central finance team should charge the business
unit based on their individual emissions over a period of time
i.e. $38 * their total emissions in tonne

COLLECTION INTO A CENTRAL CARBON FUND

The Money collected from each business unit is hence used
to pay off the external mandatory carbon taxes.

Carbon pricing
Pricing