The FINANCIAL — Carbon pricing is the most effective way to cut carbon emissions, according to 54% of executives surveyed for EY’s report, Shifting the carbon pricing debate: emerging business attitudes fuel momentum for global climate action, as low-carbon discussions intensify at COP21, the 2015 UN climate change conference in Paris.
The global survey of more than 100 executives who have an impact on their company strategies by EY’s Climate Change and Sustainability Services (CCaSS) practice found that 48% of respondents say their company is in favor of carbon pricing, with just 7% saying that they are against it. Looking at the findings regionally, 64% in Europe and 59% in emerging markets are in favor of carbon pricing, compared to the US where just 18% of companies were in favor. The vast majority of US respondents (73%) are “neutral” on the topic.
In countries where carbon pricing mechanisms have not yet been implemented, 73% of respondents say they expect that mechanisms will be implemented within the next five years. There is also clear demand for improvements to existing carbon pricing schemes, with 63% saying that current approaches to carbon pricing needs to be rethought.
Juan Costa Climent, EY Global Leader, Climate Change and Sustainability Services, says:
“Carbon pricing is a topic that divides opinion within the business community and highlights a particularly deep difference in regional thinking. While many large-scale businesses recognize that carbon pricing can cut emissions, many are calling for harmonized, reliable and transparent methods that can be implemented with rigor and discipline.”
Impact of carbon pricing on business
Seventy-eight percent of respondents say that that carbon pricing would have a strong positive impact on fostering innovation, with carbon pricing triggering initiatives that are beneficial to performance and not just compliance. Eighty-one percent say that it would have a positive impact on investment in green growth opportunities within their business. At the other end of the scale, a quarter (26%) of respondents say that carbon pricing would have a negative impact on overall carbon emissions for their organization, while 27% say that it would have a negative impact on the appetite for investment in their country.
Internal carbon pricing
With big business increasingly focused on reducing carbon emissions, 75% of respondents already benchmark against industry average emissions, with a further 75% investing in low-carbon technologies. Sixty percent of respondents are making a renewable energy commitment, with this strategy most common among large organizations with revenues of more than US$10b. Within this revenue group, 9 out of 10 say they are investing in low-carbon technologies, and 76% say they have made a renewable energy commitment. Overall, across all businesses, setting an internal carbon price is the least favored strategy at 15%.
When it comes to the reasons for implementing a carbon pricing strategy, a third (33%) say that it is to meet regulatory requirements, with 29% saying it aligns with company strategy and values and 19% because it is part of a global standardization effort.
Global COP solution
Overall, executives are confident that COP21 will lead to a fair and reliable carbon pricing scheme at 55% versus the 45% that are pessimistic about the outcome of COP21. However, 68% of respondents believe it will primarily be up to national governments to lead the fight on climate change, as this year’s conference requires the submission of intended nationally determined contributions (INDCs) by attending countries.
“Big business involvement in the discussions in the run-up to COP21 has clearly had some impact on how achievable a fair and reliable carbon pricing scheme is thought to be amongst business executives. Many businesses realize that the benefit of carbon pricing can extend beyond simply meeting regulatory requirements. Yet the global business community wants a strong consensus from COP21 before low-carbon market practices are consistently implemented worldwide,” says Costa Climent.
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