The basics of putting Cool Pricing to work

Amidst the noise and clamor surrounding the Paris Climate Summit (COP21), the voice of business and its role to combat climate change remains clear. If the world is to achieve the massive amount of greenhouse gas emissions reductions required, then businesses must be fully involved. The informal feedback from colleagues at the Summit is that, in many areas, it is businesses that are pushing the policy-makers to a decision. Market-based solutions must continue to lay a foundation for aggressive action and provide a clear mechanism for efficiently reducing energy consumption and making investments in renewables.

While we hope COP21 will result in a range of corporate and global policy commitments, we know that a set global price on carbon will not be an immediate outcome. This leaves many business leaders and policy-makers concerned as to how more than 180 countries will implement effective climate action plans without a carbon price. The only real alternative is to implement bureaucratic national permitting schemes of some sort that are bound to be mired in complexity, cost and compromise. To stay ahead, if not lead the way, businesses are recognizing that adopting their own carbon pricing schemes will not only enable them to set aggressive reduction targets but guide corporate decision-making and investments towards low-carbon technologies.

But how does this work actually get done? And how much information do you need to make a big carbon reduction commitment like more than 114 global companies just did on Tuesday?

Anthesis has been knocking heads together to answer this very question. The result we call Cool Pricing™ – a flexible carbon pricing framework suitable for businesses large and small.

The principles are deceptively simple: create a ‘virtuous circle’ of investment and reward driven by the crowd sourcing of carbon-saving innovations from within the business and focused on delivering against a set of agreed corporate outcomes. The applications for this are incredibly dynamic and can take many forms and promote innovation across a company.

We know that data collection can often act as a barrier to action, so we have tried here to call out the most important pieces of data that companies are already reporting.

There are five basic requirements:

1. Measure or estimate your annual scope 1, 2 and 3 (if desired) GHG emissions and energy consumption. It’s better, though not essential, if you are able to break this down by activity type (such as Fleet, Offices, Manufacturing, Data Centers, etc.) and region (Country- US, or Region- North America or EMEA, etc.).
2. Identify any existing carbon offset and renewable energy purchasing or investment activities. If so, collect this information together – ideally by region, type (PPA, green utility tariffs, or RECs/ GOs), and with costs and emissions or MWh as appropriate.
3. Gather some basic business growth projections including, for example, revenue, headcount, square footage, and/or production for at least a 5-year period. Even better, develop these growth rates by activity type and region.
4. If you have any existing or planned GHG reduction goals or activities, capture this information. Ideally, this should include ROI data. Also, decide whether any new commitments towards carbon reduction can or should be tied to the implementation of a price on carbon, such as setting a science-based GHG reduction target, committing to procuring renewable energy or setting a net zero goal.
5. Beyond any direct investment in renewables, RECs/GOs and/or offsets, ask what other types of programs (by your company or within your value chain) could be stimulated or supported by the fees generated from a price on carbon?

Once you have collected this data and answered these types of questions, the fun work can begin to build out a Cool Pricing model that projects your future business growth and identifies cost and carbon-saving opportunities.

The output is a strong business case that both reflects corporate reduction targets and maximizes ROI. Very Cool. If you are interested in learning more, do get in touch with our Cool Pricing creators:

Josh Whitney (US)          Craig Simmons (UK)