Internal carbon pricing: rationale, promise and limitations

摘要

In recent years, many firms have adopted the practice of putting a price on carbon for internal decision-making as a tool to achieve their carbon strategy goals. This article asks why firms would adopt a constraint like an internal carbon price voluntarily. After discussing the economic theory behind assigning a monetary value to carbon emissions, three different models of internal carbon pricing used by firms are reviewed. A discussion on the usefulness of each internal carbon pricing model for a firm's carbon management objectives is presented. The article concludes with a discussion on limitations of internal carbon pricing and its potential to assist in the process of meeting the Paris temperature objectives.