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Corporate use of carbon prices
Commentary from corporations, investors and thought leaders A white paper from CDP North America About CDP and CDP Disclosure
CDP, launched in 2000 and formerly known as the Carbon Disclosure Project, administers an annual climate change questionnaire to public companies. The request is made on behalf of CDP's investor signatories, and results are made public online and in annual reports. CDP signatories are banks, investors, wealth advisors, pension funds, and other entities in the financial services sector. In 2013, 1,000 US companies disclosed through CDP, including 334 companies from the Standard & Poor's 500. Global y, 54% of world market capital now discloses through CDP. In 2014, CDP is col ecting disclosure data on behalf of 767 investor signatories control ing $92 tril ion in assets through its climate change program. Investors become signatories to CDP's questionnaires to secure disclosure of environmental data across four separate programs—climate, water, forests, and Carbon Action. The resulting data provides the financial community with information to help drive investment toward a low-carbon and more sustainable economy.
Findings and results of 2014 disclosures wil be announced from September 2014.
American Electric Power
Nick Akins, Chairman, President & Chief Executive Officer Bob Litterman
Chairman, Risk Committee, Kepos Capital; Former Chairman, Quantitative Investment Strategies, Goldman Sachs Asset Management Columbia University
Jason Bordoff, Professor of Professional Practice in International and Public Affairs; Founding Director, Center on Global Energy Policy Exelon Corporation
Christopher D. Gould, Senior Vice President, Corporation Strategy and Chief Sustainability Officer Generation Investment Management
Tammie Arnold, Global Head of Client Relations Governor Christine Todd Whitman
Former Governor of New Jersey and Administrator of the US Environmental Protection Agency Microsoft Corporation
Rob Bernard, Chief Environmental Strategist Pax World Funds
Julie Fox Gorte, Ph.D., Senior Vice President for Sustainable Investing Stanford University
A case study in internal carbon pricing: Royal Dutch Shel Stephen Comel o and Stefan Reichelstein; Graduate School of Business and the Steyer-Taylor Center for Energy Policy and Finance TD Bank Group
Karen Clarke-Whistler, Chief Environment Officer The Walt Disney Company
Beth Stevens, Ph.D., Senior Vice President, Corporate Citizenship, Environment and Conservation The World Bank
Rachel Kyte, World Bank Group Vice President and Special Envoy for Climate Change Xcel Energy
Frank P. Prager, Vice President, Policy & Strategy In December 2013, CDP released a white paper1 detailing explaining this subject and issues a call to action for how S&P 500 companies are using internal carbon corporations to take leadership in managing climate pricing as a strategic tool in their business planning. change by engaging government and civil society and The paper generated significant media interest, in large putting a price on carbon.
part because the companies that use these prices are CDP hopes this paper can help companies identify how typical y industrial, manufacturing or fossil fuel companies calculating and using internal carbon pricing can be associated with higher emissions profiles.
a useful and effective tool to future-proof the financial This strong interest led to many questions, asked both performance of fixed assets.
in the media and directly to CDP, about what carbon With the recent EPA announcement on the regulation prices mean and how they function. Common questions of existing power plants under section 111( d) of the Clean Air Act, it is clear this is an issue that will • Why are these companies using continue to rise in prominence in the coming months and years. As that happens, CDP will continue to provide valuable information to investors on how • How are these prices calculated, and how do they corporations are managing and leading the transition to function as internal costs? a low-carbon economy.
• Do carbon prices drive strategy and investment? • What are the implications of the use of these prices for investors, companies and policymakers? This paper was conceived to provide insight on these and other questions through direct commentary from CDP hopes this paper can help companies using carbon prices, investors, policy makers, companies identify how calculating and and academics. These various perspectives demonstrate using an internal carbon price can be a that corporate use of carbon pricing can spur innovation, useful and effective tool to future-proof curtail risk and provide investors with an economic the financial performance of fixed assets.
valuation of climate-related risks and opportunities. Senior leaders of major companies such as AEP, Disney, Microsoft, TD Bank, and Xcel Energy describe in their own words why and how their companies price carbon risk as part of their business strategy. Investors from Generation Asset Management and Pax, as well as former Goldman Sachs Chairman for Investment Strategies Bob Litterman, provide perspective on why properly valuing carbon is increasingly crucial to decision making among asset managers and owners. The paper also features insights from thought leaders in this space, including former EPA Administrator Christine Todd Whitman and Jason Bordoff, who speak to how an internal price on carbon can encourage investment and grow the US economy. The World Bank goes beyond CDP North America, December 2013.



American Electric Power
Chairman, President & Chief Executive Officer American Electric Power has used a carbon
price within its internal planning processes for a
number of years. As one of the largest providers
of electricity in the United States and a large
consumer of fossil fuels, appropriately valuing
carbon is an essential part of prudent risk
management.

carbon capture and storage project AEP's current carbon price reflects retrofitted to an existing power plant. an expected market value for carbon emissions predicated upon AEP uses a carbon price within either legislation or regulatory its Integrated Resource Planning action requiring carbon emissions (IRP) process to appropriately reductions in the early part of the capture the potential future policy next decade. At this point in time, and regulatory risk associated with In recognition of this potential risk, the most likely avenue for carbon carbon emissions. The IRP process we have taken a number of steps to regulation directly affecting AEP's is the fundamental pathway through reduce our carbon emissions footprint operations appears to be the US which we assess and plan for over the past decade, including EPA's carbon emission standards providing reliable electric supply to deploying energy efficiency programs, under section 111(d) of the Clean Air our customers over a longer-term purchasing renewable energy and Act. These regulations, released on time horizon. The IRP is a formal constructing new, highly efficient June 2, 2014, may prompt a review process within many of our states, conventional generating facilities. of our carbon pricing assumptions which involves publical y disclosing due to the greater clarity around a plan for future operations that regulatory expectations. is subject to review by regulators and stakeholders. In most cases, Given the scope of AEP's operations, it includes a robust stakeholder it comes as no surprise to investors The use of a carbon price favors process to inform the plan's that carbon is priced within AEP's investment in new zero- or low-carbon development. AEP's IRP process planning process. This process wil considers all available resource and continue as long as the regulatory generation technologies, as wel as market options to achieve the least- and financial risk remains. Our gradual divestment (i.e. retirement) of older responsibility is to provide safe, carbon-intensive generating sources.
reliable and affordable electricity to The carbon price used within the our customers in an environmental y IRP process is a fundamental input responsible way and to ensure our that places a relative value on carbon investors receive a fair return. To dioxide emissions from AEP's electric meet these obligations, the use of generating facilities and future an appropriate carbon price helps facilities that may be considered ensure that our capital investments within the planning process. The Based on these actions and other are prudent and not at risk of effects of carbon pricing are further factors, we have reduced our annual becoming stranded.
integrated into AEP's forecasts greenhouse gas emissions by 21% for commodity pricing, including since 2005 and 31% since 2000—an wholesale electricity, natural gas exceptional achievement over such and coal. The use of a carbon price a short period of time. Furthermore, favors investment in new zero- or during the period of 2003–2010, AEP low-carbon generation technologies, voluntarily participated in a binding as well as gradual divestment (i.e. carbon emissions reduction program retirement) of older carbon-intensive through the Chicago Climate generating sources.
Exchange. AEP also constructed the world's first ful y integrated Chairman, Risk Committee, Kepos Capital; Former Chairman, Quantitative Investment Strategies, Goldman Sachs Asset Management Science has clearly demonstrated that climate
change is happening and is creating significant risk.
Just last month, for example, a panel of climate
scientists convened by the American Academy for
the Advancement of Science published a report titled
"What We Know," in which they wrote, "human-caused
climate change is happening, we face risks of abrupt,
unpredictable and potentially irreversible changes,
with highly damaging impacts, and responding now will
lower the risk and cost of taking action."

Pricing this risk appropriately is an these incentives recognizes the for economic agents to speed up the obvious and urgent necessary step. uncertainty of climate change and use of stranded assets before the Many governments around the globe, therefore attempts to build in a incentives are put in place. Of course including the United States, however, margin of safety. In a rational world, there is no excuse for a government have refused to create appropriate such incentives would be created knowing of the risk to postpone a incentives to conserve on the pro- immediately, would be instituted risk management incentive in order duction of greenhouse gas emis- across the entire global economy to al ow owners of these assets to sions. In fact, in much of the world and would penalize emissions at extract value before the risks are there are very significant subsidies to a level economists refer to as the official y recognized. The creation the production and consumption of social cost of carbon, which the of appropriate incentives to reduce fossil fuels, and these subsidies are US government currently estimates emissions does not destroy the value much larger in aggregate than the to be around $37 per metric ton of of stranded assets; rather it causes the small incentives that do exist in some carbon. The social cost of carbon is actual lower value to be recognized.
locations to reduce emissions.
the best estimate of the externality For investors, the immediate risk created by emissions—the expected Corporations in much of the is that society, recognizing how present value of the uncertain future world face an uncertain political irrational and risky such delay is, will damages they might cause.
environment in which there are move more quickly than is general y no existing incentives to conserve Corporations typical y report expected to eliminate the political on emissions, but in which such expectations that emissions frictions and to put those appropriate incentives are expected to be incentives will begin soon, but will incentives in place. If so, then the instituted at some point in the start at a level well below the social artificial y high valuations of stranded future. In this uncertain environment, cost of carbon. They are then assets will fall to the level that corporations are forced to make expected to increase slowly over appropriately and rational y reflects assumptions about future emissions time. Such expectations are based the damages that their emissions pricing in order to make decisions primarily on the assumption that may create. Owning stranded assets about which long-lived capital political friction will prevent rational at current valuations is a bet that investments make sense. Moreover, policy from being implemented for rational incentives will not be put the valuations of certain highly many decades.
in place for a long time to come. pol uting assets, such as coal, will Investors can best identify such There is, of course, an obvious risk be negatively impacted by increased overvalued assets by comparing the in such expectations. The purpose expectations of such incentives. path of corporate emissions price of creating incentives to reduce Such assets are often referred to as expectations with their own view. The emissions is to manage climate stranded assets.
ability to make that comparison is the risk. Risk management policies are reason many investors are looking for These assumptions about always an urgent priority and should transparency in corporate emissions future incentives reflect not only never be implemented slowly. This is expectations of when emissions particularly true about climate risk, in pricing will start, if it is not yet in which the uncertainty about potentially place, but also about the path of catastrophic impacts in the distant emissions prices over time. These future is quite significant. Moreover, incentives to reduce emissions are the expectation of an irrational delay the only effective brake the world in creating appropriate incentives has. The appropriate time path of creates its own perverse incentives


Jason Bordoff, Professor of Professional Practice in International and Public Affairs; Founding Director, Center on Global Energy Policy Greenhouse gas emissions are present in almost all areas of modern economic activity. The breadth of the problem demands a market-based approach.
While there are many reasons why companies would begin to account
for an internal carbon price now, as indicated by CDP's December 2013
report, it should send a strong signal to policy makers that despite
the divisive political debate around climate change, many in corporate
America are preparing for some form of nationwide carbon pricing.
This should be viewed as good news. The necessity to There are success stories that show cap-and-trade counter the global increase in greenhouse gas emissions systems can be effective. The Clean Air Act Amendments is only growing. Action will need to be taken at a national of 1990, signed into law by President George H.W. Bush, level, and the sooner it occurs, the lower the cost. enacted limits on the amount of SO², the precursor to Carbon pricing is the best option on the table to ensure acid rain, that could be emitted by the country's coal-fired the solution addresses our two major policy concerns, power plants. A robust trading program in SO² permits environmental protection and economic growth, in the emerged as a result, slashing SO² emissions while most balanced way possible. providing cost savings on the order of $1 bil ion annual y compared to what it would have cost under a command- Greenhouse gas emissions are present in almost all areas and-control regulatory approach. The program also of modern economic activity. The breadth of the problem produced health benefits estimated between $50 and demands a market-based approach. Whether through a $100 bil ion per year. tax, a cap and trade program, or some form of equivalent program, carbon pricing initiatives press industries to find Since cap-and-trade legislation failed in Congress, there the most economic and efficient way to cut the emissions have been cal s to create carbon pricing in the form of a associated with their business. It spurs innovation, as tax. Whether this will lead to meaningful legislative change companies strive to find solutions that reduce the financial seems unlikely at this point. All indications are that it will impact on their bottom lines, and, by extension, their remain very difficult to find a majority in Congress to push consumers' bottom lines as wel . through a carbon pricing solution to one of the greatest problems facing our country. That companies are already The failure of Congress to pass laws to reduce preparing for carbon pricing, however, shows they under- greenhouse gas emissions in a meaningful way increases stand some form of policy response to the growing threat the economic repercussions of climate change, raising of climate change is likely to come at some point. the costs of future environmental endeavors as well as the risk of weather-related disasters, including droughts and floods.


Christopher D. Gould, Senior Vice President, Corporation Strategy and Chief Sustainability Officer As the nation's leading competitive energy
provider, Exelon continually conducts near-
and long-term modeling to best determine and
inform our daily market positions, near-term
portfolio management and decision making
around investment and development. 
Investors should value market forecasting expertise that focuses on ensuring short-term market performance while also being forward-thinking and seeking to One way Exelon has used a ensure valid strategic direction price on carbon to develop a under emerging market forces like climate change This balance of supply curve that ranked GHG short- and long-term considerations abatement measures based on is essential for ensuring corporate success, but also for meaningful the price of carbon needed to We identify and regularly review key integration of these issues into how support the economic viability market drivers, including potential corporations operate. As a result of regulatory or policy influences such our careful consideration of existing as a price on carbon, and use and potential market drivers across them in our ongoing analysis to the energy value chain, Exelon has capture a range of plausible future positioned itself as the leading US outcomes and develop our overall competitive energy provider, with strategy. Because we focus on one of the cleanest and lowest-cost the three attributes of sustainable power generation fleets and one of energy—clean, reliable and the largest retail customer bases in affordable—potential regulation of the United States. al ow cost-effective solutions for carbon is one of many considerations consumers. Meaningful and verifiable Exelon has a solid platform for in our planning models, and results reduction standards implemented pursuing its continued commitment are weighed with other issues that in a market-based fashion will to sustainable growth and may impact market conditions.
further enable corporations to competitive markets, helping drive factor carbon emissions into their One way Exelon has used a price on customer choice, innovation and strategic business planning and drive carbon to develop a supply curve efficiency in a carbon constrained investments in technologies that will that ranked GHG abatement mea- reduce greenhouse gas emissions.
sures based on the price of carbon Exelon has consistently supported needed to support the economic market-based solutions as the viability of the options. This approach most effective way to drive national included both demand side and sup- carbon emission reductions. In ply-side alternatives (e.g., energy ef- light of EPA's proposed carbon ficiency, increasing nuclear capacity regulations under Clean Air Act and renewables), and helped inform Section 111(d) for existing power the Exelon 2020 strategy and goal plants, Exelon supports compliance to abate 17.5 mil ion tonnes of GHG solutions that treat all carbon-free emissions annual y by 2020. This resources equal y, regardless of age approach supported prioritization of or technology, and provide flexibility investments that ultimately led Exelon for states to adopt strategies that to achieve its goal in 2013.



Generation Investment Management
Global Head of Client Relations The investment dynamics related to carbon
(CO²) emissions are complex and multifaceted,

driven by continuing changes in regulation,
market forces, consumer and societal
pressures, and environmental litigation.
Successfully navigating the changing landscape
requires a thoughtful framework for risk
analysis and management by companies and
investors alike.

The framework should be one methodical approach to incorporating Changes in transport (e.g. electric that incorporates downside risk meaningful carbon pricing scenarios vehicles and fleet logistics), energy analysis across asset classes (fixed into valuation and analysis will help generation (e.g. solar and wind) and income, equity, real assets, etc), as investors to consistently identify and water consumption (e.g. desalination well as analysis of the substantial evaluate risks and opportunities and irrigation), to name a few, upside related to innovation and dispassionately, through an indicate that successful businesses new technologies that enable more economic/financial lens. Most will be ones that adapt their operating effective use of natural resources. importantly, carbon risk is no longer model to the emerging opportunities Importantly, a robust framework a left tail risk, but the lack of action of a carbon-constrained economy. should also consider the risks related could lead to a disorderly unwinding Companies that remain entrenched to time horizon analysis, such as the of exposure and more serious in outdated business practices and compression of cycles of change downside outcomes. However, the blind to the realities of the transition seen in recent years as a result of the market has visibility into increasing to a low-carbon economy will face rapid development and adoption of vulnerability of carbon-intensive increased risk of stranding, making assets, and investors have ample their assets less productive and their time to thoughtful y adjust their stocks and bonds less desirable. capital al ocation accordingly. In Furthermore, the momentum terms of engagement, investors behind voluntary sustainability can ask management and boards disclosure should serve as a questions such as: signal to policymakers that even A methodical approach to incorporating How does your CAPEX strategy
incumbents in carbon-intensive meaningful carbon pricing scenarios into map with the transition to a low industries acknowledge the direction valuation and analysis will help investors of investment capital. The time for to consistently identify and evaluate including climate risk into business Are your business model and
risks and opportunities dispassionately, and investing decisions has never R&D strategy sufficiently positioned through an economic/financial lens.
been more important. Incorporating to capture value in a move away from a meaningful price on carbon into valuation frameworks not only helps How exposed is your long-lived
investors and companies avoid fixed asset base to carbon asset risk? misal ocating capital and potential y owning assets that will be impaired The transition to a low-carbon in the transition to a low-carbon economy will unlock an era of economy (whether CO innovation presenting investors with As the various forces that could are priced directly or indirectly); but, opportunities to capture value as impair carbon-intensive asset critical y, it also il uminates emerging energy infrastructure and fossil- valuations come to bear, investors investment opportunities as creative fuel dependent industries undergo with robust frameworks for solutions develop.
unprecedented transformational incorporating CO² risk (e.g. a material change. This next chapter of price on carbon) into valuations will capitalism will usher in resource and be better positioned to succeed. A design innovations across industries.


Governor Christine Todd Whitman
Former EPA Administrator, Co-chair of the Clean and Safe Energy (CASEnergy) Coalition and President of the Whitman Strategy Group Those companies that incorporate a price on carbon when looking at their capital expenditures often find that the inclusion of this price changes the return profiles of their investments over the life of the assets. Every day there is an increasing recognition of the dangers and challenges
caused by climate change. As a former Administrator of the EPA and
Governor and resident of a coastal state, I understand these challenges
deeply. But, addressing climate change also presents us with opportunities
to embrace new solutions as we build a cleaner energy portfolio.
Despite the attention given to political within the life of assets that can Nuclear energy already represents intransigence and hotly debated be as much as 30 years. When nearly two-thirds of America's disagreements in Washington and at companies look at the world through emissions-free electricity, and it is the the United Nations, there is positive this practical lens, they suddenly find only source of carbon-free baseload movement in addressing climate that alternatives such as wind, solar, electricity. That makes it a natural change. The global public is not hydropower, geothermal and nuclear complement to other carbon-free, wil ing to wait for stars to align in their energy all become more attractive.
but intermittent, sources like wind governments or intergovernmental Cities, communities and corporations organizations; people are not do not have the luxury to put off As cities, communities, and only demanding action, they are action any longer. They are on the companies continue to take action acting. That is why it should not front lines of climate change, day in on climate change, they will continue be surprising that companies, and day out. All options for mitigating to put pressure on governments organizations and cities around climate change are being brought to come together and tackle what the world are moving to measure, to the table and weighed equal y. is becoming the defining struggle disclose, price, and reduce their That means solar, wind, hydropower, of our generation. Taking steps to carbon footprints.
geothermal and nuclear energy al measure, disclose, and then act What is interesting and important have a place in our energy portfolio.
on reducing carbon emissions— about the inclusion of internal carbon that's our commitment to a In my work as co-chair of the prices by so many companies Clean and Safe Energy Coalition, is that this trend is changing the I have sought to drive an informed economics of doing business. Those dialogue around all our energy companies that incorporate a price choices—including highlighting on carbon when looking at their the climate change and clean-air capital expenditures often find that benefits nuclear energy brings to the inclusion of this price changes our portfolio. We're working to the return profiles of their investments dispel old notions of nuclear energy over the life of the assets. The fact and raise awareness of the many that they do this is prudent planning benefits it brings to communities as a cost of carbon (or some other across America, particularly when it regulatory measure to reduce carbon comes to addressing climate change. emissions) could well be mandatory Chief Environmental Strategist By applying a financial cost to the carbon impact of our operations, it provides justification to prioritize efficiency—and therefore cost reductions—across the organization.
At Microsoft, we believe that we have a responsibility to address
the environmental impact of the growing energy demands from our
operations, services and devices. At the same time, we have an
opportunity to demonstrate how the use of our technology can help
accelerate the transition to a low-carbon economy.
A carbon fee model1 is an excel ent The fees col ected from the The world around us is changing, way to provide both the financial carbon fee support important and as everyone has seen in the framework and the formal discipline projects—from internal efficiency news, difficulties like extreme weather to drive efficiency projects. By measures to renewable energy and droughts, severe pol ution applying a financial cost to the projects like the 110 megawatt in cities and other environmental carbon impact of our operations, Keechi wind project2 in Texas. In chal enges continue to impact the it provides justification to prioritize addition, we invest in carbon offset world significantly. This is increasingly efficiency—and therefore cost projects such as biodiversity in becoming a chal enge for society, reductions—across the organization. Madagascar and Indonesia3 and which makes it a bigger and bigger It encourages everyone to get efficient cook stove projects in chal enge not only for Microsoft, but involved and has opened the door to Mongolia.4 These projects are not also for our customers and partners. conversations that weren't occurring only offsetting GHG emissions, We have an amazing opportunity in otherwise by making everyone but they are also advancing global front of us to tap into the culture of accountable for lowering the citizenship by improving health, innovation and the power of cloud company's environmental footprint.
protecting ecosystems and providing computing, devices and our partner income and employment to local ecosystem to enable a transition to a We've found over time that the new way of thinking and interacting more we can integrate sustainability with our planet's resources.
goals across the business, the Realistical y, it would not be possible better position we are in to respond for us to adopt this model if it did Environmental sustainability is to changing economic, social and not benefit the overall productivity an important focus across our environmental conditions. Our carbon and profitability of our company. organization. Ultimately, we believe fee model supports a culture of The growth of our business must that making a commitment to innovation and efficiency at Microsoft. also incorporate the greater needs becoming carbon neutral and We are promoting the efficient use of society. Increasing our efficiency implementing a carbon fee will of resources and purchasing green and performance in a resource- continue to be good for both the power, and we hope to set an constrained world across all of our environment and our business. example by driving accountability operations is an important part of our through our internal carbon pricing efforts to be a better, more social y and carbon fee model. minded corporate citizen. 1. 2. Microsoft Green Blog, November 4, 2013.
3. osoft Green Blog, February 12, 2014.
4. Microsoft Green Blog, September 3, 2013.
Pax World Funds
Julie Fox Gorte, Ph.D. Senior Vice President for Sustainable Investing In order to avoid catastrophic climate change—
which means keeping future global warming
below 2°C—we need to cut human-caused
emissions of greenhouse gases (GHG) by 80%
below 1990 levels by 2050.
the beginning of the first phase of the face reputational risks, not to mention EUETS. That is a rate of reduction physical risks to their own bricks of less than 1% per year, and the and mortar from increasingly severe prices that achieved it ranged from weather and rising seas. Companies €30/tonne to about €3/tonne, but with internal carbon prices are the lower figure reflects the impact assuring investors that they do know of a global recession, when slowing the migration patterns of at least this economic activity has a tendency to specific black swan. cut emissions anyway. Moreover, current global emissions Of the 29 US companies that re- are over 60% higher now than they ported establishing carbon prices, were in 1990, making the chal enge 11 said what those prices were, and even more daunting. The penalty Asset managers are always seeking out they range from $6/ton to $60/ton for not doing so wil be increasingly (which comes out to $5.44 to $54.4/ better-managed companies to invest torrential rainfal , persistent drought tonne). The low number comes from in, and good management is about and rising sea levels.
Microsoft, and the high one from anticipating all significant risks, not just Some companies are proactively Exxon-Mobil. It's impossible to know things that affect the balance sheet in working to slay the climate risk vam- what true reductions will be at either the next quarter. pire, or at least weaken it, by using company, but it is probably safe to internal carbon prices. All of the 29 assume that Exxon's price will cut US companies that reported using emissions more than Microsoft's wil . carbon prices to CDP are leaders in Wil either be sufficient? It's impossi- addressing climate AND have done a commendable thing. A positive carbon Leadership is ephemeral. To stay It is also important to know, price means that markets are reducing leaders, companies will need to especial y for investors. Asset emissions below what they would start setting carbon prices that will managers are always seeking out otherwise have been. Pricing carbon reduce emissions in chunks rather better-managed companies to emissions means that capital expen- than increments. That, in turn, invest in, and good management ditures must incorporate the cost means keeping accurate records is about anticipating all significant of carbon emissions in the planning on what reductions are achieved by risks, not just things that affect the process, and that tends to weed out the prices they have imposed, and balance sheet in the next quarter. projects that involve heavy emissions.
adjusting those prices to achieve a Companies that use internal carbon rate of reduction that is consistent Similarly, a high carbon price will cut prices are signaling investors that with what we need. In a world with a emissions more, and faster, than a they are aware of the risks posed by rapidly changing climate, leadership low one. What carbon price would climate change, both to society and is a little like the way the Red Queen achieve the 80% reduction we need? to their own companies. Investors are described traveling in Several studies have estimated increasingly aware of so-cal ed black Through the that the European Union Emissions swan risks, or the risks of statistical y Looking Glass: "Now here, you see, it takes all the running you can do, to Trading System (EUETS), the world's unlikely but deeply damaging events, keep in the same place. If you want largest and best established carbon and the warmer the globe is, the to get somewhere else, you must run market, has reduced emissions by more likely it is that the largest at least twice as fast as that!" around 2–8% since 2005 as part of emitters of greenhouse gases will 1 CDP, "Use of internal carbon price by companies as incentive and strategic planning tool," ment of Energy & Climate Change, July 10, 2012; and Tim Liang, Misato Sato, Michael Grubb December 2013.
and Claudia Comberti, "Assessing the effectiveness of the EU Emissions Trading System," Centre for Climate Change Economics and Policy Working Paper No. 126, Grantham Research 2 Richard G. Newell, William A Pizer and Daniel Raimi, "Carbon Market Lessons and Global Institute on Climate Change and the Environment Working paper No. 106, January 2013.
Policy Outlook," Science, Vol. 343, 21 March 2014.
4 As of 2/28/14, Microsoft Inc. represented 1.2% of total assets of Pax World Balanced Fund, 3 See, for example, Lucas Merrill Brown, Alex Hanafi and Annie Petsonk, "The EU Emissions 2.0% of Pax World Growth Fund, 1.2% of Pax World Global Women's Equality Fund, 0.2% of Trading System: Results and Lessons Learned," Environmental Defense Fund, 2012; Ralf ESG Managers Growth and Income fund, 0.2% of ESG Managers Balanced Fund, 0.1% of Martin, Mirabelle Muűls and Ulrich Wagner, "An Evidence Review of the EU Emissions Trading ESG Managers Income Fund, and 0.2% of ESG Managers Growth Fund. No Pax World Funds system, Focussing on Effectiveness of the System in Driving Industrial Abatement," UK Depart- owned any shares of Exxon Mobil. Holdings are subject to change.
Stephen Comello and Stefan Reichelstein, Graduate School of Business and the Steyer-Taylor Center for Energy Policy and Finance For proposed new capital investments, such as an oil extraction facility or a refinery, a $40 charge per metric ton of carbon dioxide is levied on all anticipated direct emissions that are attributable directly to the project's operations. Stefan Reichelstein A case study in internal carbon pricing: Royal Dutch Shell
Like other major oil companies, Shel assets. At the same time, the policy is investment planning and control. For has imposed an internal charge on its intended to incentivize business units projects with a long, useful life, it is own CO² emissions for several years. to structure their operations so as to unavoidable that actual cash returns From publicly available reports and reduce emissions up to a marginal will differ from forecasted returns. direct conversations with managers cost of $40/tonne of CO².
This, in turn, may create incentives at Shel , we gather that this for managers to engage in "creative As a general rule, the $40/tonne multinational company has adopted optimism" when they present their charge is applied uniformly—that the fol owing corporate policy: for original project cash flow forecasts. is, regardless of the business unit proposed new capital investments, As a general management principle, proposing a project or the location such as an oil extraction facility or a it is therefore considered essential of the assets to be deployed. One refinery, a $40 charge per metric ton to have ex-post measures of exception to this rule pertains to (tonne) of carbon dioxide is levied performance that are consistent projects proposed in jurisdictions on all anticipated direct emissions with the initial capital budgeting with carbon pricing regimes already that are attributable directly to the process. Yet such an alignment in place, e.g., refineries in California project's operations. becomes difficult if the $40/tonne are obligated parties and therefore per charge is applied at the planning As a consequence, proposed invest- must obtain emission permits at a stage, without fol ow-through in the ments will meet the usual financial current price of $14/tonne. In that actual measure of profit received. criteria in the capital budgeting pro- case the internal price of $40/tonne Management at Shell points out that cess only if the projected cash flows would be adjusted by the expected the company has an extensive set do so subject to a $40/tonne tax that actual CO² charges so as to avoid of checks and balances to prevent would hypothetical y be paid to an "double-taxation." any "gaming" in the capital budgeting outside party in connection with the It was emphasized that Shel process. The empirical question then project in question.
imposes the internal carbon price becomes whether such checks can Our conversations with managers at as an "investment screening device" be effective in a global and diversified Shell indicate that the company has at the project selection stage. In company which otherwise relies adopted this form of shadow pricing in particular, the $40/tonne charge on the principle of decentralized order to mitigate the financial risk as- is not applied in measuring the decision making.
sociated with long-term investments subsequent operating profits of the in operating assets. To the extent business units. This raises a broader Shell anticipates that substantial car- issue that should be of interest bon prices will be imposed in future to future field research. Imposing years around the world, the policy an internal carbon price only as becomes a mechanism for curtailing an "investment screening device" investments at risk of "stranding" could lead to a mismatch between TD Bank Group
Karen Clarke-Whistler¹ Chief Environment Officer We use a carbon price to engage our more than 85,000 employees in our carbon-neutral initiative and make it a factor in just about everything we do. In 2010, TD Bank Group (TD) became the first North America–based
carbon-neutral bank, just one part of our commitment to environmental
leadership. Our approach to achieving carbon neutrality has three
elements: reducing our energy use, greening our energy supply and
investing in innovative renewable energy credits (RECs) and carbon
offsets—at least 50% of which have a social benefit.
How does our internal carbon pricing offsets and RECs or purchase services for our customers. These work? We calculate the cost of the greener—and general y more offerings include financing for RECs and carbon offsets on an expensive—energy. The potential residential renewables and energy annual basis and charge them back for avoided costs AND increased efficiency projects, insurance for to our business groups based on the environmental benefits is a business hybrid and electric vehicles, $3 relative contribution of those groups driver. We now approach the design bil ion in financing to companies with to our overall carbon emissions. Our and operation of all our facilities low-carbon operations, and a very internal price on carbon is about $10 through a "green" lens. This has led successful $500 mil ion green bond— per tonne of CO²e.
to development of net zero energy the first to be issued by a commercial branches; design standards for new bank in Canada. From 2006 to 2013, Having an internal price on carbon stores that are 45% more energy our investment in the low-carbon aligns with our approach of embed- efficient; solar instal ations on 100 economy was more than $6 bil ion. ding the environment across our facilities; a LEED platinum energy- business. We use a carbon price to There's an old saying, "You can't efficient data center; and retrofitting engage our more than 85,000 em- go wrong by doing right" and that of existing facilities. Our total ployees in our carbon neutral initiative has proven particularly true when GHG emissions from energy have and make it a factor in just about it comes to our carbon neutral decreased 11% from 2008, despite everything we do. commitment—it is something that having a 23% growth in the space resonates with our employees, our Being carbon neutral and having we occupy and almost doubling customers and our investors. an internal price on carbon has our revenue.
quite literal y transformed the bank. We've been able to leverage these Take our facilities: for every tonne of valuable insights gained from our emissions we can't eliminate through own facilities to create a range of energy reduction, we have to invest low-carbon financial products and real dol ars to buy and develop 1 With support from Monica Sood, Chartered Professional Accountant, TD Environment The Walt Disney Company
Beth Stevens, Ph.D., Senior Vice President, Corporate Citizenship, Environment and Conservation We have proven that putting a price on carbon isn't bad for business by making positive strides toward ambitious environmental goals, while simultaneously delivering three consecutive years of record financial performance. From Disney's earliest days, we have believed that our concern for kids
and families must extend beyond their entertainment to the world in
which they live. Our actions as a company must meet the standard set
by the stories we tell. Disney has filled this role through the responsible
actions we've taken as a company, including our efforts to use our
resources wisely and conserve nature as we operate and grow.
Central to our environmental stewardship efforts is our The Disney Climate Solutions Fund (DCSF) was created to ambitious goal of achieving zero net greenhouse gas offset what we can't reduce. It is made possible because emissions. We believe that the private sector plays a we have a price on carbon; fees from the carbon price significant role in advancing energy efficiency and that an flow directly into DCSF. Through DCSF, we purchase high- internal price on carbon is an important tool. quality forest carbon credits to offset the emissions we haven't yet found a way to reduce. These projects not only Disney has found that by attaching a financial value to help us meet our goal but provide many additional benefits carbon, our businesses have an incentive to reduce their besides carbon sequestration, such as conserving regions greenhouse gas emissions and to think creatively about with high ecological and biodiversity value and protecting new approaches and technology that will help reduce critical habitat and areas with valuable ecosystem their carbon footprint. We have proven that putting a services. Since 2009, Disney has invested $48 mil ion in price on carbon isn't bad for business by making positive forest conservation, improved forest management and strides toward ambitious environmental goals, while reforestation projects around the world. simultaneously delivering three consecutive years of record financial performance. Putting a price on carbon has proven to be an effective tool in stimulating emissions reductions, including Pricing carbon has engaged our businesses to assess maximizing energy efficiency and seeking low carbon the impact of their operations and evaluate where they alternatives. Investing in forest carbon projects enables us can make improvements to reduce their emissions. to address our remaining emissions now, while continuing Since our program requires each business segment to seek innovative ways to further reduce our emissions to contribute an al ocated fee based on their annual in the future.
greenhouse gas emissions, their emissions directly impact their bottom line. We have also built this into our capital planning process, so that our businesses have to take the carbon fee into account when planning new capital projects. The World Bank
Rachel Kyte, World Bank Group Vice President and Special Envoy for Climate Change A dangerously warming planet is far more than
an environmental challenge—it is a fundamental
threat to efforts to end poverty and threatens to
put prosperity out of reach for millions of people.
reduction targets in their business As part of the global effort to mobilize planning and are disclosing climate ambitious action and political will risk to investors. Major companies to complement and support a worldwide have publicly announced meaningful global climate agreement greenhouse gas reduction goals in 2015, United Nations Secretary- that are leading them to accelerate General Ban Ki-moon has invited their investment in energy efficiency, heads of state and government, along new business models and new with business, finance, civil society, businesses. They are also pricing and local leaders, to a Climate carbon internal y. More than 100 Summit in New York on September companies publicly disclosed to 23, 2014. The Summit aims to CDP in 2013 that they already utilize catalyze action that will shift the world As we move to an era of growth carbon pricing as a tool to "future to a low-carbon, resilient economy.
through climate action, reports from proof" their business models— the Intergovernmental Panel on managing risks and opportunities Climate Change confirm that a robust to current operations and future price on carbon has never been more profitability. important. A strong price signal, There is also a growing body of especial y in major economies, will evidence that corporate disclosure establish the right incentives and on climate change correlates well Pricing carbon is inevitable. A direct financial flows toward efficient, with strong financial performance. resilient investments. growing number of countries, In a recent study, CDP found that Pricing carbon is inevitable. A industry leadership on climate provinces and cities are growing number of countries, disclosure is linked to higher provinces and cities are designing performance on three key financial solutions. Over 40 national and metrics that reflect overall corporate 20 sub-national jurisdictions have quality: return on equity (+5.2% p.a. already adopted emissions trading between top 20% companies and or carbon taxes or plan to launch bottom 20% companies), cash flow them. Together, these countries and stability (+18.1% p.a.) and dividend regions account for more than 22 growth (+1.6% p.a.). CDP's work percent of global emissions. Many is important. Getting the word out more are developing policy packages is critical to help a race to the top Support for policies that lead to a that will price carbon. iterate with public policy change.
price on carbon will be important common ground among government, Key in this is the message from Momentum is growing. Countries civil society and the business businesses that they want certainty and companies are preparing for going forward and that pricing a world with an increasing cost carbon will be a factor. Businesses of carbon and the cost-effective Please join us by bringing your see that carbon pricing is the most solutions needed at scale. There company into this leadership club efficient and cost-effective means of are trade-offs. Invest now, reap on carbon. Put a price on it. Urge tackling the emissions chal enge. But reward later. New, cleaner jobs are government action in support. Your if they want to maintain growth in a emerging, reflecting a transition from family, your employees, and your climate-impacted world, companies brown jobs. But transition and trade- shareholders will thank you.
cannot wait for governments to act. offs can be managed, as they have with every other revolution. Corporate Many companies are already working leadership, as CDP reveals, is within a carbon-pricing system and managing that process, not trying to are developing expertise in managing turn back the tide. their emissions. The leaders are also incorporating greenhouse gas Xcel Energy
Vice President, Policy & Strategy Regardless of policy outcomes, we have plans in place to reduce carbon emissions by 31% by 2020, while keeping our prices competitive and reducing carbon policy risks faced by the company and its customers.
Electric utilities are the most capital-intensive businesses in the US,
and we evaluate our long-term investments across a range of future
scenarios. Therefore, Xcel Energy and other utilities use carbon proxy
pricing to plan for potential future carbon policy outcomes.
In fact, carbon regulation in the US Today, the US power sector Given the uncertainty in US carbon power sector has already begun with continues to face some uncertainties policy, PUCs, utilities and investors Environmental Protection Agency about the timing, stringency and favor planning outcomes that are (EPA) regulations covering new form of carbon regulation. In fact, robust across a range of carbon plants, while President Obama has the EPA's rules may not require the policy outcomes. For instance, we also directed the EPA to develop states to place any price on carbon have scheduled certain coal plant existing source regulations. Most emissions. While we regard carbon retirements that were economic utilities today are focused on EPA's regulation as probable, carbon with and without carbon policy regulated pathway, rather than markets and prices are less certain, assumptions, and we have also made congressional y legislated carbon so we view carbon proxy pricing economic wind and solar purchase policy, to forecast the future of as one useful tool among others decisions not reliant on carbon carbon policy.
to plan for carbon regulation. We policy. These decisions do not rely have implemented other planning on a carbon price, but they do In the states where Xcel Energy measures, such as requiring carbon reduce carbon emissions and risk. operates, public utility commissions capture and sequestration on new Regardless of policy outcomes, we (PUCs) oversee our major generation forecasted coal plants. We do this have plans in place to reduce carbon and other investment planning to model the direct requirements of emissions by 31% by 2020, while activities. Many of these PUCs have current regulations, not to anticipate keeping our prices competitive and directed us to use carbon proxy a carbon price. Over the next two reducing carbon policy risks faced by pricing for planning purposes. Under years, we will learn more about the company and its customers.
the regulatory planning process, the EPA's plans to regulate existing utilities and other stakeholders plants, and we may adapt our risk propose price levels, timing and management tools accordingly. All escalation of carbon proxy prices. that said, Xcel Energy continues to Xcel Energy bases our proposed believe that in the long term, some carbon proxy prices on a periodic type of carbon market or pricing survey of third-party market mechanism may arise either through forecasting consultants. The PUC EPA regulations or as a reaction to usual y determines the final carbon them, and we continue to use carbon proxy price forecast, and often proxy pricing along with other carbon requires our planning to include policy forecasting techniques.
forecasts both with and without assumed carbon proxy prices.
Tom Carnac
Maxfield Weiss
CDP North America Disclosure Services Paula DiPerna
Special Advisor
paula.diperna@cdp.net
Zoe Tcholak-Antitch
Communications
zoe.antitch@cdp.net CDP North America
132 Crosby Street, 8th Floor
New York, NY 10012
Tel: +1 212 378 2086
info.usa@cdp.net
www.cdp.net/USA
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GROUPE SRIB 2013 RAPPORT ANNUEL AMBITIOUS BRUSSELS Numeca International Radionomy & MusicMatic RAPPORT ANNUEL 13 20 05Le mot du Président 06 STRUCTURE Le Conseil d'administration La lettre du Conseil La direction et les collaborateurs du groupe finance.brussels : un groupe dédicacé aux entreprises et à la Région de Bruxelles-Capitale Les chiffres-clés du groupe

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BERGLAUF VON PFELDERS (1.620 M) ZUR STETTINER-HÜTTE (2.875 M) CORSA IN MONTAGNA DA PLAN (1.620 M) AL RIFUGIO PETRARCA (2.875 M) BERGLAUF VON PFELDERS (1.620 M) ZUR STETTINER-HÜTTE (2.875 M) CORSA IN MONTAGNA DA PLAN (1.620 M) AL RIFUGIO PETRARCA (2.875 M) JEDER TEILNEHMER ERHÄLT PER TUTTI I PARTECIPANTI