Abstract
Organisations attempt to contribute their share towards fighting the climate crisis by trying to reduce their emission of greenhouse gases effectively towards net zero. An instrument to guide their reduction efforts is internal carbon pricing. Next to choosing the right pricing tool, defining the exact value of an internal carbon price, especially against the background of potential regulatory external carbon prices, and assessing its impact on business units’ energy systems poses a challenge for organisations. The academic literature has so far not examined the impact differences of an internal carbon price across different countries, which this paper addresses by using an optimisation model. First, it analyses the energy system cost increase of a real-world facility based on an internal carbon price compared to a potential regulatory carbon price within a country. Second, we evaluate the energy system cost increase based on an internal carbon price across different countries. The results show that with regard to internal carbon prices the additional total system cost compared to potential external carbon prices stays within 9%, 15%, and 59% for Germany, Japan, and the United Kingdom, respectively. The increase in the energy system cost in each country varies between 3% and 93%. For all countries, the cost differences can be reduced by allowing the installation of renewables. The integration of renewables via energy storage and power-to-heat technologies depends on the renewable potentials and the availability of carbon capture and storage. If organisations do not account for these differences, it might raise the disapproval of internal carbon prices within the organisation.
Highlights
In accordance with the Paris Climate Agreement, the international community widely acknowledged the urgent need to fight the climate crisis [1,2,3,4]
The results show that with regard to internal carbon prices the additional total system cost compared to potential external carbon prices stays within 9%, 15%, and 59% for Germany, Japan, and the United Kingdom, respectively
Defining the exact value for an internal carbon price and assessing the impact for business units in different countries is seen as challenging for organisations
Summary
In accordance with the Paris Climate Agreement, the international community widely acknowledged the urgent need to fight the climate crisis [1,2,3,4]. The Intergovernmental Panel on Climate Change (IPCC) defines greenhouse gases as “those gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and emit radiation at specific wavelengths within the spectrum of terrestrial radiation emitted by the Earth’s surface, the atmosphere itself and by clouds. Besides regulatory bodies defining and implementing some sort of carbon price, the private sector can voluntarily implement a price within its organisation. This is called internal carbon pricing [7]. In the context of carbon pricing, the media claims that the private sector is “moving faster than governments” [9] and the number of companies which use some form of internal carbon price (ICP) has been increasing in recent years [10,11,12]
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
