Carbon pricing: Firms must act before they're forced to

Compressing the cost of emissions could decide whether a business thrives or gets left behind

- SOUMYA SARKAR

Indian firms are approaching a crucial juncture in their climate journey. For far too long, the cost of carbon has remained an invisible ledger entry, an externality conveniently overlooked in balance sheets and investment decisions. This era of carbon apathy is drawing to a close, as staying in business could soon pivot on internal carbon pricing (ICP), or the practice of assigning a monetary value to greenhouse gas emissions within an organization.

A handful of progressive firms, including industrial giants like Tata Steel and Mahindra, alongside IT major Infosys and the consumer products company ITC, have begun incorporating ICP to shape their strategic investments and risk assessments. These prices range from ₹500 to ₹4,000 ($6-$48) per tonne of carbon, which is low compared to global standards, but still represents a forward-looking shift. This foresight is commendable, but for most of India Inc, carbon remains an unacknowledged liability.

Globally, ICP is turning into a standard corporate practice. Tech behemoths like Microsoft impose a global carbon fee across their operations, while energy giants such as Shell use a robust price of $100 per tonne in their capital planning. These MNCs understand that the financial repercussions of carbon emissions are no longer hypothetical. They have become pressing risks.