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Determinants of internal carbon pricing

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  • Bento, Nuno
  • Gianfrate, Gianfranco

Abstract

Action against climate change is urgent and requires the participation of firms. The progressive internalization of carbon costs by firms is essential in the transition to a low-carbon economy. Internal carbon pricing is an emerging set of practices voluntarily adopted by companies to embed climate footprint in operations and business models. We explore the factors that explain the adoption of internal carbon prices (ICP) among global companies reporting to the Carbon Disclosure Project between 2015 and 2017. We specifically test whether the macroeconomic, regulatory, industry, and firm-specific characteristics affect the disclosed level of the ICPs. Results show that the ICPs depend to a large extent on the national climate policy, country's development, industry, and corporate governance. Furthermore, context explain more the differences in ICP than industry and firm-specific characteristics. Thus uncertainties around countries' climate policy hampers carbon pricing in business. These findings shed light on the factors that contribute to the dissemination of carbon pricing in society.

Suggested Citation

  • Bento, Nuno & Gianfrate, Gianfranco, 2020. "Determinants of internal carbon pricing," Energy Policy, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:enepol:v:143:y:2020:i:c:s0301421520302445
    DOI: 10.1016/j.enpol.2020.111499
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    3. Gorbach, O.G. & Kost, C. & Pickett, C., 2022. "Review of internal carbon pricing and the development of a decision process for the identification of promising Internal Pricing Methods for an Organisation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 154(C).
    4. Oliver Gregor Gorbach & Noha Saad Hussein & Jessica Thomsen, 2021. "Impact of Internal Carbon Prices on the Energy System of an Organisation’s Facilities in Germany, Japan and the United Kingdom Compared to Potential External Carbon Prices," Energies, MDPI, vol. 14(14), pages 1-41, July.
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    6. Teijo Palander, 2023. "Data-Driven Internal Carbon Pricing Mechanism for Improving Wood Procurement in Integrated Energy and Material Production," Energies, MDPI, vol. 16(8), pages 1-10, April.
    7. Jihad C. Elnaboulsi & Wassim Daher & Yiğit Sağlam, 2023. "Environmental taxation, information precision, and information sharing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 301-341, April.
    8. Patricia Crifo & Yann Kervinio & Emile Quinet, 2021. "L’intégration des impacts environnementaux dans l’évaluation des investissements privés," Post-Print hal-03270118, HAL.
    9. Zhu, Bangzhu & Xu, Chenxin & Wang, Ping & Zhang, Lin, 2022. "How does internal carbon pricing affect corporate environmental performance?," Journal of Business Research, Elsevier, vol. 145(C), pages 65-77.
    10. Weng, Zhixiong & Liu, Tingting & Wu, Yufeng & Cheng, Cuiyun, 2022. "Air quality improvement effect and future contributions of carbon trading pilot programs in China," Energy Policy, Elsevier, vol. 170(C).
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