Carbon pricing may be linked to China

Moves by US companies to incorporate a carbon price into financial plans suggests they "may already be thinking about possible international linkages" with China, which is launching carbon-trading exchanges, an official with an environmental data-gathering organization said.

A report by CDP North America, an arm of UK-based nonprofit CDP, which collects information on greenhouse gas emissions at publicly traded companies, found that at least 29 US companies, including the five major oil giants, are planning future growth on the expectation that the US government will force them to pay a price for carbon pollution as a way to control global warming.

"The companies acknowledge the process of ongoing climate change - including extreme and unpredictable weather events - as a key relevant business factor for which they wish to be prepared," the report said.

The carbon prices used - ranging from $6 to $60 per metric ton - are "based on the assumption that addressing climate change will be both a business cost and possible business opportunity, regardless of the regulatory environment," according to the report, which was released last week.

The report suggests that companies that see a carbon price as an inevitable part of their financial future could be more motivated to back policies that target climate change. Addressing the investment community directly, it said the data will help "drive investment toward a low-carbon and more sustainable economy".

China, the world's biggest source of climate-changing carbon emissions, launched two new pilot carbon-trading exchanges two weeks ago in Beijing and Shanghai to cut high greenhouse gas emissions and limit choking smog. The exchanges - expected to attract leading companies such as oil giant Sinopec and coal miner Shenhua Group in Beijing and steelmaker Baoshan Iron and Steel in Shanghai - are designed to force industrial companies to buy credits to cover any CO2 emitted above allocated quotas.

There is no legal means of forcing the companies to participate.

China is set to launch seven pilot carbon-trading platforms in total. It already has one running in Shenzhen. Another is to be established for Guangdong province before the end of the year, and another three are due to go into operation in Hubei province and the cities of Tianjin and Chongqing next year.

China's government seeks to cut the 2005 rate of CO2 emissions per unit of GDP growth by 40 to 45 percent by decade's end.

"There is going to be a price on carbon in China soon, and this report shows how US companies may already be thinking about possible international linkages," said Paula DiPerna, a special adviser for New York-based CDP North America who also was involved in founding Tianjin Climate Exchange, China's first emissions trading exchange.

While no official linkage exists yet between China's carbon price, China's emerging emissions exchanges, and US use of carbon price, "such linkages are likely to evolve as global environmental policies on climate change evolve, perhaps as early as 2015", when a United Nations gathering reviews member nations' efforts to combat climate change, DiPerma wrote to China Daily in an e-mail.

Calling China "well advanced in thinking about how carbon trading and carbon pricing may be used in its strategy to reduce greenhouse gases and incentivize use of low carbon energy", DiPerma wrote that companies that are experienced with carbon pricing will benefit "especially if US companies operating in China are required to follow Chinese regulations regarding emissions trading and emissions reductions".

Even though prices may vary region to region, companies working with carbon pricing as a planning tool will have "ongoing strategic, business and reputational advantage, all the more if international trading becomes the norm over time", DiPerma wrote.

Companies incorporating a carbon price in their long-range business strategies include oil giants ExxonMobil Corp, ConocoPhillips, Chevron Corp, BP and Royal Dutch Shell, according to the CDP report.

Tom Carnac, North American president of CDP, said the companies seem to have determined that a carbon price is a foregone conclusion. "It's climate change as a line item," Carnac was quoted in the New York Times. "They're looking at it from a rational perspective, making a profit. It drives internal decision-making."

In the report, Chevron Corp is quoted as saying that climate change influenced the company's decision last year to develop a natural gas-fired, electric-generating facility, scheduled to go online in 2017. That move followed its 2011-launched plan to begin decommissioning several small coal-fired generating stations by 2015 or 2016.

Other companies on the list are Delphi Automotive PLC, Walt Disney Co, Con-Agra Foods Inc, Wal-Mart Stores Inc, Apache Corp, Hess Corp, Wells Fargo & Co, Cummins Inc, Delta Air Lines, General Electric Co, Google Inc, Jabil Circuit Inc, Microsoft Corp, EI du Point de Nemours and Co, Ameren Corp, American Electric Power Co, CMS Energy Corp, Duke Energy Corp, Entergy Corp, Integrys Energy Group, PG&E Corp and Xcel Energy Inc.

michaelbarris@chinadailyusa.com