June 6, 2024

Carbon Pricing: Simple to Set, Powerful to Use

June 6, 2024

Carbon Pricing: Simple to Set, Powerful to Use

June 6, 2024

Carbon Pricing: Simple to Set, Powerful to Use

June 2024

Carbon Pricing: Simple to Set, Powerful to Use

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When it comes to carbon pricing, there are 2 questions everyone wants answered:

  • How do I set one?
  • How do I use one?

Setting a carbon price is reasonably simple. The approach I normally use is:

  1. Identify major emissions-driving activities
  2. Estimate the cost to decarbonise each activity
  3. Calculate a weighted average

The weighted average might change over time as the cost of decarbonising the activity shifts, and the number of emissions associated with that activity shifts. You should update this calculation periodically.

Using a carbon price is where it gets interesting. I’m seeing two use cases developing (both in B2B):

  • Companies selling products with lower embedded carbon using a blended dollar/carbon cost to demonstrate the value their product brings to the table;
  • Companies selling products with higher embedded carbon pitching decarbonisation collaborations to their customers on the basis of the carbon cost for their product.

If you find this interesting, Ilya Kleyner and I are running a webinar on carbon pricing on the 26th of June, 3-3.45 pm (BST). Register below.

By Saif Hameed, CEO of Altruistiq

Industry Insight: The consumer won’t pay for sustainability…so why put a claim on the packet?

There is good evidence to suggest that products with sustainability claims on the pack support better commercial outcomes (many of us have seen the NielsenIQ/McKinsey report).

What is less clear is:

  1. 𝗖𝗼𝗿𝗿𝗲𝗹𝗮𝘁𝗶𝗼𝗻 𝘃𝘀. 𝗰𝗮𝘂𝘀𝗮𝘁𝗶𝗼𝗻: Does a sustainability claim directly drive sales, or are successful companies more likely to use such claims?

Take Oatly, for example.

Their success likely stems from a combination of factors: a strong product, excellent marketing, and a good distribution model.

It's hard to isolate the claim's true impact.

  1. 𝗗𝗼𝗲𝘀 𝘁𝗵𝗲 “𝘁𝘆𝗽𝗲” 𝗼𝗳 𝗰𝗹𝗮𝗶𝗺 𝗺𝗮𝘁𝘁𝗲𝗿?: Anecdotal evidence suggests the specific claim itself might not matter as much as simply having one.

This indicates a general consumer preference for brands that demonstrate that they’re doing some good (whatever it might be).

Right now, the risks for B2C companies making sustainability claims can seem higher than the immediate upside.

Our view - this is more true for incumbents than challengers (or anyone who has a challenger approach to the market).

Policy Pulse - ISSB reporting standards taking root in UK

In the sustainability reporting world, the UK has taken a big step towards updating its reporting requirements in line with the ISSB. These are the IFRS S1 and S2 for climate and sustainability disclosures, which similar to the CSRD climate disclosures, require complete GHG reporting across Scopes 1, 2 and 3.

The UK government set out an endorsement process in May which involves creating an advisory committee to help finalise how the ISSB gets translated into UK law.

What happens next?

  • The committee works with the ISSB to develop standards, such as revisions to the existing climate standard and the creation of new standards like biodiversity.
  • Based on advice from the committee, the UK Government chooses whether to adopt each ISSB standard as a UK Sustainability Reporting Standard.
  • The FCA will take it forward to decide how to implement rules, such as what companies are impacted, any particular disclosure requirements, and any exemptions.

What this all means?

The creation of such an endorsement process and advisory committee are creating a delay, as the original timeline had an intended adoption date for the ISSB of July 2024. However, it is at least a strong indication that mandatory Scope 3 reporting will eventually be coming to the UK sometime in 2025.

Learn more

Other News

  • 🇺🇸 Carbon offsets get federal guidelines as US President Joe Biden has a plan to reform the VCM (New York Times). Biden’s administration announced first-of-its-kind federal guidelines for high-integrity voluntary carbon markets. They aim to restore investor confidence and ensure credit purchases result in verifiable decarbonisation as businesses currently seem reluctant to invest in carbon credit projects. Indeed, The We Mean Business Coalition (WMBC) found that 78% of businesses not already purchasing carbon offsets, would not consider entering the market.
  • 🥵 Pakistan and India experience record heat (AP News). Extreme temperatures hit South Asia this week, with temperatures hitting 52 C in parts of India and Pakistan. According to AP News, 52% of children in Pakistan will not be in school this week, as heatwaves force closures. Elsewhere, In the northeastern states of India, at least 25 are dead from heavy rain and landslides.
  • 🇨🇳 Environmental theft data accusations from China (South China Morning Post). China’s spy ministry accused two foreign NGOs of stealing environmental data “under the guise of research and environmental protection”. It was said that these NGOs collected geographical, meteorological and biological data from China’s nature reserves. This was said to pose a risk to their national security. As nature and biodiversity data climb up the corporate agenda, China’s strict data-sharing regulations will be increasingly challenging to navigate.

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