Carbon risk generally refers to the potentially negative consequences that companies and industries face due to the emission of greenhouse gases (GHGs), the resulting climate change impacts and the global transition to a net-zero economy. Carbon risks could be regulatory, physical, reputational or financial. For example, regulations designed to reduce industry emissions (such as carbon pricing mechanisms) can increase costs for high-emitting companies. Companies and their investors are increasingly recognizing the urgency of assessing, reporting and managing carbon risk, in order to mitigate risks early and seize opportunities in the net-zero transition.

What is the difference between carbon tax and carbon pricing?

Carbon tax: A carbon tax is a direct tax imposed on GHG emissions, levied per unit of carbon emissions. Carbon pricing: Carbon pricing refers more broadly to the approach of putting a price on carbon, through carbon taxes, carbon fees, as well as cap-and-trade systems, creating an economic incentive for emissions reductions.

What is Carbon Pricing

What is carbon pricing?

Carbon pricing refers to the mechanism by which governments capture the external costs of greenhouse gas (GHG) emissions, such as the result of heat waves and droughts or flooding and sea level rise, and tie them to the original emitters.

Go to: How carbon pricing works.

Carbon pricing is here. Is your business ready?

Due to the spread of carbon pricing schemes (see the carbon regulation map below) and the inevitable rise of the price of carbon, the commodities sector — the highest emitting industry in the world — is now faced with discontinuing high-emission activities, reducing emissions or continue business as usual and pay an increasing price for their emissions. This unavoidable trend is disrupting the economics of global supply chains and is the main factor in your organization’s carbon risk.