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Barriers to internal carbon pricing in German companies

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  • Riedel, Franziska
  • Gorbach, Gregor
  • Kost, Christoph

Abstract

Internal Carbon Pricing (ICP) is a tool for companies to internalize negative external effects caused by their carbon emissions and to prepare themselves for a low-carbon economy. Globally, an increasing number of companies adopts ICP. Yet, many German firms do not use it yet. This paper explores why German companies do not adopt ICP and which barriers hinder the proper implementation of the instrument drawing on the concept of eco-innovation. Eighteen semi-structured interviews were conducted and analyzed using a structuring qualitative content analysis. The findings show that small companies face particularly strong challenges to mobilize the financial, technical, and informational resources necessary for the implementation of ICP. Internal carbon price levels similar to existing external carbon pricing schemes fail to unfold a steering function, because these prices are currently too low. Further difficulties arise due to the complexity of correctly accounting for GHG emissions and setting the right carbon price. The paper highlights the need for stringent external carbon policies on a national and European level, for more external information on ICP, and for the facilitation of cooperation between companies in order to increase the adoption rate and the efficacy of ICP in Germany.

Suggested Citation

  • Riedel, Franziska & Gorbach, Gregor & Kost, Christoph, 2021. "Barriers to internal carbon pricing in German companies," Energy Policy, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:enepol:v:159:y:2021:i:c:s030142152100519x
    DOI: 10.1016/j.enpol.2021.112654
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    References listed on IDEAS

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