How Carbon Pricing Can Boost the Bottom Line

by | Jun 27, 2014

coal power plantAmerican Electric Power and Xcel Energy are among the utilities and other companies now pricing carbon as part of core business strategy, according to research from CDP.

The free white paper offers insights into how a price on carbon pollution might benefit companies and the US economy as a whole. In addition to the utilities, other contributors include former EPA chief Christine Todd Whitman, investors, policy experts from Stanford and Columbia universities, and others.

In light of the EPA’s Clean Power Plan, understanding carbon emissions policy and how it affects corporations has become a critical aspect of business planning, says Tom Carnac, CDP’s president for North America. Pricing that risk with a cost for carbon pollution is one way to address the business cost of climate change, Carnac says.

Insights include:

  • Xcel Energy’s VP for policy and strategy Frank Prager says the company has already scheduled certain coal plant retirements that it considered economic with or without carbon policy assumptions, but continues to utilize an internal price on carbon for proxy planning purposes to reduce future carbon risk faced by the company and its customers.
  • AEP’s chairman Nick Akins describes how the company uses an internal price on carbon in resource planning to assess future policy and regulatory risk, and to ensure that as a high emitter of carbon pollution they are making prudent capital investments that are not at risk of being stranded in a low carbon future.
  • Bob Litterman, former chairman for investment strategy at Goldman Sachs, describes how without proper pricing of carbon risk, investors also face the potential of stranded assets — portfolios full of companies that cannot burn the fossil fuels in their reserves.

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