Internal Carbon Pricing Adoption Rises 80% Among Global Companies

Nearly half of the world's 500 largest companies now factor an internal carbon price into their business plans, according to CDP research. The number of companies using or planning to use internal carbon pricing has risen 80% over five years, covering more than 2,000 firms representing over US$27 trillion in market capitalisation.

CDP surveyed nearly 6,000 companies on carbon pricing in 2020 and found that 2,000 of them disclosed current or planned use of an internal carbon price. Companies including Microsoft, Ørsted and Mitsubishi Corporation have already adopted the mechanism. The median internal carbon price disclosed by companies in 2020 was US$25 per metric ton of CO2e, with Asia and European firms implementing the highest average price of US$28 per ton.

The data signals a deepening recognition of carbon risk across the global economy. Eleven of 13 sectors tracked — including fossil fuels, manufacturing and financial services — recorded an increase in internal carbon pricing adoption between 2019 and 2020. The power sector leads, with 56% of companies currently pricing carbon internally. CDP flagged a concerning gap, however: 60% of firms that expect carbon-price regulation did not identify it as a substantive business risk, suggesting investors may be receiving incomplete risk data.

With EU emissions trading scheme carbon prices surpassing €40 per tonne in early 2021 and 64 carbon pricing initiatives in place or scheduled globally, pressure on corporates to raise their internal price assumptions is intensifying. Asia recorded the largest absolute increase in adoption, with China's newly launched emissions trading scheme — the world's largest — spurring a 27% year-on-year rise in firms using or planning to use internal carbon pricing. Regulators and investors are increasingly using CDP data to assess corporate exposure to carbon policy risk.

Key figure — US$27 trillion