Pricing for Co2 Emissions

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In the last three decades, climatic change has become an emergency of international concern. The rise of carbon (Co2) emission among business players and a need to drive investment into a cleaner option to save the environment is rising. Besides, the cost of carbon emissions has adverse implications on peoples’ health, affects crop, droughts, and increased seawater rise. However, to control the effect of GHG emission, the governments and businesses across the world agreed to place the burden of polluting the environment on people who are benefiting from it directly.

Carbon pricing focuses on a market-based strategy that aims to lower global warming by capping the amount of carbon emission each player emits and charging out any extra unit released to the environment during production. As a result, it gives carbon emission a price and an actual monetary value. That is why emitting carbon becomes more expensive and increases the cost of doing business. In this guide, we will discuss

  • The factors that influence the cost of co2
  • Emissions in total in the steel industry
  • Measures which a company takes to reduce carbon emissions
  • To what extent a company could reduce emissions (if not in line with Paris agreement reductions, it gets more expensive
  • The extent to which Carbon emissions are already taxed with general taxes
  • Demand for carbon certificates in Europe

Factors influencing pricing of carbon per ton

Carbon pricing is a powerful tool that helps in addressing climate. However, carbon prices keep on fluctuating due to several factors. Below are some of the significant factors that influence the price of a ton of co2.

Extreme weather

Extreme weather conditions have a positive impact on carbon dioxide prices. Usually, in cold weather, people tend to switch on their heat sources, causing an increase in energy consumption. Consequently, increased energy use results in higher emissions which translate to rising carbon prices.

Also, weather conditions, whether rainy, sunny or windy, influence energy production on renewable energy sources. Thus, the total amount of renewable energy produced will determine how much more fossil fuels enterprises will require to fulfil their needs on energy supply. High renewable energy production implies less amount of fossil fuels will be necessary and vice versa.

Energy prices

Energy prices have a strong relationship with carbon prices. Higher costs of fossil fuels, the leading carbon emitters, induce people to switch to other non-fossil energy sources. As a result, carbon emission will reduce, thus reducing carbon prices.

The level of GDP

There is a positive correlation between GDP and carbon emissions. A growing per capita GDP results in higher production, thus more emission. Consequently, more carbon emission implies higher carbon prices.

Alternatively, when an economy is in crisis, the prices of carbon fall due to low carbon emission.

Free allocation

 The percentage of free allowance allocation granted to companies in Europe to protect the country from the threat of carbon leaking also influences carbon prices. The higher the free allowance allocation, the lower the costs of carbon.

Co2 Emissions in total in the steel industry

In Europe, the steel industry is the largest carbon dioxide emitter and account for 22 per cent of the total GHG emission. When processing one tonne of steel, you will emit about 1.9 tonnes of carbon dioxide to the environment. However, with strict targets to comply with the Paris climate agreement, steel companies must ensure they become carbon neutral by 2050. With less than 30 years to comply, steel companies will have to invest in a new production line and adopt hydrogen-based reduced ion processes that can help them reduce their amount of carbon emission.

Measures which companies take to reduce Co2 emissions

Nowadays many companies are working towards implementing effective measure that reduces green gases emission. As a result, companies in the oil and gas, automotive, financial, and electricity generation sector have made severe commitments by creating innovative strategies that reduce their emission. The following are some of the measures taken by companies to reduce greenhouse gases emission.

Zero-emission electric cars

Research by environmental protection agencies shows that when an individual or company uses a passenger car daily, it usually emits approximately 4.6 metric tons of carbon annually. And since carbon is a primary contributor to global warming, companies with eco-friendly measures prefers to use electric cars to accomplish their daily schedules because of their zero-emission.

Electric generation

Many companies that are in the power generation business use fossil oil to generate their electricity. When you burn petroleum products, you will meet your energy problems but be ready to embrace a severe global warming crisis in the future. In Europe, the burning of fossils fuels in the transport and power sectors has reduced significantly, with many companies adopting renewable sources like solar power.

Building

In Germany, research shows that buildings generate 30% of carbon emission. The carbon emission in the building is due to heat consumption and electricity. For instance, to control this type of emission, homeowners are required to do frequent energy-conservation renovations. Such renovations include insulating your building to lower its heat consumption during winter. The German government gives such investment grants and subsidies as a climactic action package. To acquire this fund, you apply for the initial consultation done by an accredited energy efficiency consultant to recommend you for the implementation.

Get GHG emissions verified

There are companies obligated with verifying and validating a company greenhouse gas emission. As a company, when you chose to work with one of them, they will help you walk through the process with ease as they make you have good progress. When your company has GHG emissions verification, it gives external stakeholders confidence because your greenhouse gas data are accurate, credible, and quantifiable. That is why working with a verified GHG emission gives your company an excellent baseline.

Work with a high-tech solution.

When you install intelligent thermostats and motion-activated light, your business will avoid unnecessary waste of energy. As a result, you will drastically reduce carbon emission directly by installing a high-tech solution.

To what extent a company could reduce emissions

All the European countries are members of the Emission Trading System. ETS is the largest carbon market and key European union policy that focuses on fighting climate change. The approach uses a cap model to regulate GHG emissions emitted by more than 11000 installations across Europe. For every installation you buy, you will receive emission allowances that are actionable by the member state. If unused, the allocations are traced back to other installations. However, members can access innovation and modernization funds, which help companies in the member state upgrade their energy system and champion innovations by funding renewable energy projects.

The extent to which Co2 emissions are already taxed with general taxes

In Europe, many countries levy their car taxes based on the amount of fuel your car consumes or based on its carbon emission. However, carbon taxes are levied on different types of GHG and the scope used is different and differs from country to country. For instance, Sweden ranks the highest with a tax rate of €112.08 per ton of carbon, while Poland ranks last with €0.07 per ton of carbon emissions. Besides Switzerland, which has its GHG emission trading system and Ukraine, all other countries in Europe are members of EU ETS.

Demand for Carbon certificates in Europe

Nowadays, carbon certificates have grown their popularity among businesses under strict regulatory obligation laid out by EU ETS. The decision to demand certificates will vary from whether a company is buying to offset its free allocation and expected future emission. However, many companies take advantage of the available benefits acquired when they have a carbon-neutral certification.

Conclusion

Any country that collects carbon taxes generates a significant amount of revenues. With this revenue, they distribute fairness and foster economic growth. However, with these measures, companies tend to reduce their GHG emissions without necessarily requiring them to reduce their production. Contact us for GHG (Co2) support.

By Georg Tichy

Georg Tichy is a management consultant in Europe, focusing on top-management consultancy, projectmanagement, corporate reporting and fundingsupport. Dr. Georg Tichy is also trainer, lecturer at university and advisor on current economic issues.

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