Embedding a carbon price into business strategy

Transcription

1 Embdding a carbon pric into businss stratgy Sptmbr 2016

2 1,200+ companis disclos to CDP thir plans or currnt practic of placing a pric on thir carbon missions as an approach to managing carbon risk of ths companis ar taking this approach furthr, by mbdding a carbon pric dpr within businss stratgis and oprations to hlp tak tangibl action on climat chang. 02

3 Contnts 04 Excutiv summary 05 Forword 05 Mssag from invstors 08 Latst trnds 10 Sctor trnds 11 Rgional trnds 12 Policy and carbon pricing: Who prics carbon around th world? 14 Disclosd prics by rgion: Intrnalizing policy prics 16 A maturing practic 16 Embdding an intrnal pric on carbon into businss stratgy 18 Carbon pricing is alrady dlivring chang 20 Cas studis 20 Novartis 21 SUEZ 22 Saint-Gobain 23 Nissan Motor Co. Limitd 24 Arçlik A.S. 25 Harmony Gold Mining Company Limitd 26 Royal DSM 27 Appndix 27 CDP Climat Chang Qustionnair Guidanc: ffctivly answring th intrnal pric on carbon qustion 28 Full list of companis using and planning to us an intrnal pric on carbon In this rport, all pric valus ar in USD unlss othrwis statd (s currncy convrsion rats on pag 28). All missions ar rportd in mtric tons. All data is basd on th rsponss of CDP 2016 climat chang and supply chain information rqusts (only rsponss submittd prior to Sptmbr 5, 2016). Important Notic Th contnts of this rport may b usd by anyon providing acknowldgmnt is givn to CDP. This dos not rprsnt a licns to rpackag or rsll any of th data rportd to CDP and prsntd in this rport. If you intnd to rpackag or rsll any of th contnts of this rport, you nd to obtain xprss prmission from CDP bfor doing so. CDP has prpard th data and analysis in this rport basd on rsponss to th CDP 2016 climat chang and supply chain information rqusts. No rprsntation or warranty (xprss or implid) is givn by CDP as to th accuracy or compltnss of th information and opinions containd in this rport. You should not act upon th information containd in this publication without obtaining spcific profssional advic. To th xtnt prmittd by law, CDP do not accpt or assum any liability, rsponsibility or duty of car for any consquncs of you or anyon ls acting, or rfraining to act, in rlianc on th information containd in this rport or for any dcision basd on it. CDP North Amrica, Inc, is a not for-profit organization with 501(c)3 charitabl status in th U.S CDP. All rights rsrvd. 03

4 Excutiv summary Mor than vr, invstors ar dmanding comprhnsiv climat disclosur. This includs assuranc that companis ar lowring thir risk xposur to policis that plac a pric on carbon and rallocating capital to dlivr highr rturns in a low-carbon conomy. This rport provids invstors, companis and govrnmnts with an ovrviw of how companis ar rsponding to carbon pricing signals within th global conomy. Ky findings: 1. 23% mor companis disclos th adoption of a pric on carbon. 1,249 companis disclosd thir practic of pricing carbon missions, or thir plans to soon do so. This rprsnts a 23% incras from Companis us this approach to prpar for a carbon-constraind futur by building prudnt buffrs into thir businss modls today. 2. A carbon pric is bing mbddd dpr into businss stratgy compard to companis ar taking this approach furthr, by mbdding a carbon pric dpr within businss stratgis and oprations. Thy hav idntifid it as a mchanism that can hlp systmatically achiv missions rductions and rlatd targts. Companis rport that an intrnal pric hlps by providing an incntiv or addd rason to rallocat rsourcs toward low-carbon activitis; as a factor in th businss cas for R&D invstmnts; and as a way to rval hiddn risks and opportunitis in a company s oprations and in its supply chains. Exampls of companis who highlight on or mor of ths rasons ar Anglo Amrican Platinum, Arçlik A.S., Autodsk Inc., Bouygus, Cummins Inc., ENGIE, Harmony Gold Mining Company Limitd, Kring, Microsoft Corporation, Nissan Motor Co. Ltd, Novartis, Royal DSM, Saint-Gobain, Sky Plc, Socit Gnral, SUEZ, TD Bank Group, and Vina Concha y Toro SA. 3. Companis using an intrnal carbon pric ar sing tangibl impacts. 37 companis hav disclosd a tangibl impact as a rsult of intrnalizing a cost on carbon. Thy dscrib a varity of ways in which this tool has dirctly shiftd invstmnts toward nrgy fficincy masurs, low-carbon initiativs, nrgy purchass, and th dvlopmnt of low-carbon product offrings. 4. Larg numbrs of companis may b at risk. Whil 370 companis in 14 high-mitting industris say thy ar adopting carbon pricing, ovr 500 say thy do not plan to do so. Approximatly 400 of ths ar hadquartrd in countris who ar considring, ar currntly or hav alrady implmntd a pric on carbon. Th numbr of companis potntially at risk is likly to b vn largr givn th multinational natur of many of ths companis and th widr sctoral covrag of som carbon taxs. As data around carbon xposur continus to improv, invstors may qustion th risk-prpardnss of ths companis for climat rgulations. 5. Corporat carbon pricing has incrasd noticably in som rgions. This yar s rportd incras is prvalnt in all rgions. Notabl incrass wr from companis hadquartrd in Brazil, China, India, Japan, Mxico, th Rpublic of Kora, and th U.S. Som of ths countris hav carbon pricing policis in opration or policy proposals undr considration. Othrs do not. It is too arly to tll whthr ths incrass com as a rsult of corporat ractions to th Paris Agrmnt, pric signals from national polics, or ar indicativ of a nw corporat norm. 6. Pric lvls vary by rgion. Only 30% of companis disclosd th pric(s) thy us, ranging from <$1 to >$800. Typically, if clar rgulatory carbon pric signals xist, th bulk of disclosd corporat pric lvls will follow th policy pric. For xampl, many companis in Canada and th Rpublic of Kora disclosd pric lvls consistnt with th prvailing carbon pric lvls du to rgulation. In contrast, corporat pric lvls varid significantly across Europan companis, which could b du to th varity of carbon pricing policis oprating in th rgion. U.S. companis also disclosd a big pric rang and many signals that factord into pric calculations, including th EU s and California s missions trading systms and th U.S. Environmntal Protction Agncy s social cost of carbon. 7. Pricing practics vary by sctor. Of all th companis that rspondd to CDP s intrnal carbon pricing qustion, th Utilitis and Enrgy GICS sctors had th highst proportion of companis rporting that thy currntly pric or plan to pric carbon 63% of Utilitis disclosrs and 52% of Enrgy disclosrs. This compars with 30 40% of disclosing companis in th Financials, Tlcommunication Srvics and Matrials Sctors, and 19 25% in Halth Car, Consumr Discrtionary, Information Tchnology, Consumr Stapls and Industrials. { This rport s findings ar basd on disclosurs of 5,759 companis who rspondd to CDP s 2016 climat chang and supply chain information rqusts, mad on bhalf of invstors with $100 trillion in assts, and purchasing organizations with ovr $2 trillion in spnding powr. 04

5 Forword Lanc Pirc, Prsidnt, CDP North Amrica I am dlightd to launch this rport on th v of Climat Wk in Nw York. Th rsults rportd in this rlas of annual CDP data ar a sign of incrasingly concrtd action by businss to dal with th risk of a changing climat. As co-chair of th businss ngagmnt working group of th World Bank s Carbon Pricing Ladrship Coalition, I hav witnssd som of this progrss up clos as th privat sctor continus to incras its vocal support for, and implmntation of, carbon pricing. W bliv th progrss sn hr rprsnts anothr milston in a historic yar of intrnational agrmnts and action on climat chang. Additionally, w anticipat th first rlas of guidanc by th Task Forc on Climat-rlatd Financial Disclosurs, as wll as th potntially arly ntry into forc of th Paris Agrmnt. Both ar significant milstons. Whil th cumulativ impact of ths dvlopmnts has yt to b fully masurd, th rsponss to CDP s 2016 disclosur rqust indicats that th mov toward carbon pricing w rportd last yar continus apac. This rport highlights a continuing trnd that companis ar rlying on low-carbon activitis in thir corporat stratgis as a rspons to changing pric signals within th conomy. Our data show a 23% incras in th numbr of major companis using, or planning to us, an intrnal pric on carbon as an approach to managing carbon risk. It is particularly xciting to not that companis ar bginning to rport tangibl impacts as a rsult of using an intrnal carbon pric within thir businss planning procsss. Carbon pricing schms ar driving chang in corporat bhavior not yt, howvr, at th rat and scal ncssary to kp global tmpratur ris to wll blow 2 C. Whn companis and invstors intrnaliz th cost of carbon by attaching a montary valu to ach unit of CO ², it nabls thm to account for and manag carbon risk throughout thir oprations and supply chains, or thir portfolios. Companis do this whn thy raliz thy ar xposd to various forms of systmic risk and sk to manag it through pricing thir climat-rlatd missions. Businss dcision makrs may us carbon pricing as a tool to tst thir stratgy against futur scnarios or to hlp driv invstmnt towards climat-alignd corporat goals, b it an missions rduction targt, an nrgy rlatd challng, or th cration of a nw lowcarbon product lin. This lattr approach is an xciting nw dvlopmnt, as this rport discusss. A group of companis ar now rporting plans to tak thir us of an intrnal pric on carbon to th nxt lvl: using it to hlp xcut a corporat climat targt. Saint-Gobain and SUEZ, for xampl, hav assignd a highr pric for invsting in low-carbon R&D, whil Nissan applis it whn choosing btwn invstmnts that will hlp achiv thir mission rduction targts. Radrs will not that w hav includd a mssag from invstors in this yar s rport. Thr is a sachang happning in th invstmnt world on this issu and dmand for CDP data has dramatically incrasd on th part of invstors who ar rading th writing on th wall as thy sk to idntify high-carbon activitis in thir portfolios. Invstors and ownrs ar looking for clar signs that companis ar managing risk and sizing opportunitis, dmonstrating that thy can succssfully chart a cours into th conomy of th futur. Showing you ar mbdding climat chang into th hart of your businss stratgy is a critical part of this procss. Intrnalizing a pric on carbon and disclosing whn and how you us it can dmonstrat prpardnss for futur climat-rlatd challngs and opportunitis. W hop you find this rport usful for your own planning activitis, and w look forward to hlping companis and invstors to lowr thir carbon footprint, and thir carbon risk. { 05

6 Mssag from invstors Jack Ehns, CEO, CalSTRS Mats Andrsson, Formr CEO of AP4 and Vic-Chairman of th Global Challngs Foundation This rport coms at a critical tim in th global journy to tackl th risk that climat chang rprsnts. It is critical that companis dmonstrat how thy ar taking climat chang sriously and ar proprly managing it. Whil this matrial risk is somthing that pnsion funds such as CalSTRS and AP4 hav bn focusd on for many yars now, it is clar that w ar sing a progrssiv shift in how much attntion th invstmnt community at larg is placing on climat chang. This will hav a significant impact on how capital is allocatd in th futur. For CalSTRS, AP4 and othr long-trm invstors and sharholdrs, climat chang rprsnts a potntial prmannt capital loss and consquntly a significant drag on invstmnt rturns. As public pnsion funds, CalSTRS and AP4 hav hundrds of thousands of mmbrs and stakholdrs rlying on th scur rtirmnt futur that w ar hr to provid in prptuity it is absolutly critical that w tak action to guard against this risk. Th momntum and surrounding awarnss around th impacts of climat chang triggrd by th Paris Agrmnt is only on of th signs of chang flt by th financial community is a big yar for our sctor as wll, with grn financ faturd as a major focus at th rcnt G20 mting in China, followd by th Task Forc on Climatrlatd Financial Disclosurs publishing its main rport bfor th nd of this yar. Th lattr rfrs to th task forc stablishd by th G20 s Financial Stability Board to dvlop consistnt, voluntary climat-rlatd risk disclosurs that companis can us whn providing information to invstors, lndrs, insurrs, and othr stakholdrs. Transparncy is vn mor vital than vr bfor. This incrasing focus on risk disclosurs signifis that th industry will b sking firm assuranc that th companis thy invst in hav rcognizd climat risk and ar proprly managing it. For companis, this mans not only managing thir xposur to climat impacts but also incrasing climat rgulation and rlatd conomic policis bing put into plac globally. To dlivr on thir goals, govrnmnts ar hard at work implmnting policis that incntiviz low-carbon and discourag high-carbon activitis. Ultimatly, ths policis will licit a chang in pric signals in th conomy, with high-carbon activitis bcoming cost-prohibitiv. Mor importantly, ths activitis cost th conomy much mor in trms of th incrasd risk thy bring, which is why govrnmnts incrasingly turn to carbon pricing as an ffctiv conomic tool for driving down missions. It is not a qustion of whthr or not companis will b rquird to pay a pric on carbon (ithr in th form of a tax or within a cap-and-trad systm) in fact, thy ar alrady rquird to do so in many placs, and it will not b long bfor ths prics will scalat across many of th world s markts. In our funds, w hav alrady bgun to idntify th worst prformrs th worst pollutrs in ach sctor to mitigat risk in our portfolio. W bliv that ths companis will b doubly hit in th conomy of th futur not only will thir P&L b damagd, but thy will also b significantly dvalud ovr th long-trm, which gratly concrns us as sharholdrs. Additionally, w ar activly ngaging with various companis to nsur our capital is allocatd to lowr-risk, highr-rturn activitis. Bcaus pnsion funds ar not only invstors but ownrs too, w play activ rols on slction committs for major companis which w own and can thrfor bring a significant voic as part of th discussion in th lif of a company and its ovrall govrnanc and prformanc. And no CFO wants to tll thir board that pnsion funds will no longr b invsting in thm as thy ar dmd unsustainabl ovr th long-trm. This is why it is critical that companis ar abl to dmonstrat how thy ar taking climat chang sriously and ar proprly managing it. As th momntum for full disclosur in this ara incrass, w will not only b looking at company missions but also analyzing how climat risk mitigation is mbddd within thir corporat stratgis. Thos companis who show invstors and ownrs that thy tak this issu sriously and hav a plan in plac to tackl it will njoy a lowr cost of capital in th futur against thos that don t. 06

7 This is why w ar plasd to s th growing trnd of companis intrnalizing th cost of carbon. CDP s rport documnts th growing trnd of companis disclosing that thy ar pricing carbon into thir invstmnt dcision-making procsss. This is simpl risk managmnt and in som sctors should b th norm. What is vn mor intrsting to s is th growing group of companis who st a corporat carbon pric and us it to dlibratly achiv a stratgic goal whthr to driv down missions, incras low-carbon assts or stimulat a nw climat-frindly lin of products. This clarly signals to us an important chang is undrway and th momntum is growing at a global scal. ar dmonstrating to sharholdrs that thy ar gradually maturing in thir approach to climat chang and thir knowldg-bas and undrstanding of th impacts of lack of action. This is why this rport and th work that CDP is undrtaking to incras corporat ngagmnt and disclosur in this ara is so vry important. W look forward to sing mor companis masuring thir carbon, pricing it, dlivring rductions and rporting on it in th coming yars. { Companis that st a maningful missions rduction targt and clarly pric carbon into thir corporat dcision making procss Jack Ehns CEO CalSTRS Mats Andrsson Formr CEO of AP4 Vic-Chairman of th Global Challngs Foundation 07

8 Latst trnds 1,249 companis ar disclosing to CDP thir plans or currnt practic of putting a pric on carbon missions bcaus thy undrstand that carbon risk managmnt is a businss imprativ. This rprsnts a 23% incras from Th us of intrnal carbon pricing is maturing and stablishing itslf as a drivr of ral chang. Mor than vr, invstors ar dmanding comprhnsiv climat disclosur including assuranc that companis ar adquatly lowring thir risk xposur to policis that plac a pric on carbon and rallocating capital toward aras of thir businss that will s a highr rturn in a low-carbon conomy. Disclosurs to CDP in 2016 captur th corporat rspons: 517 companis ar alrady using intrnal carbon pricing as an accounting and risk managmnt tool (19% incras from 2015), and an additional 732 disclos plans to implmnt on by 2018 (26% incras from 2015). Ths companis, across all industris and gographis, hav idntifid intrnal carbon pricing as an approach to building prudnt buffrs into thir businss modls to prpar for a carbonconstraind futur. Thy hav told CDP that mbdding th cost of carbon into oprations and conomic forcasts can hlp thm bttr mitigat th risks posd by xisting or mrging carbon pricing rgulations, prioritiz nrgy fficincy, and driv invstmnts in rnwabl nrgy purchass and othr GHG missions rduction activitis. This yar s data dmonstrats that th us of intrnal carbon pricing among corporations is also maturing and stablishing itslf as a drivr of ral chang in businss practics. 147 companis ar mbdding an intrnal carbon pric vr dpr within businss stratgis and across oprations in ordr to tak tangibl action on climat chang. Ths companis hav idntifid carbon pricing as a mchanism to systmatically achiv missions rductions and rlatd targts mandatd by managmnt. A sub-st of 37 companis dscrib a varity of ways in which this tool has dirctly impactd budgt allocations or invstmnt dcisions, which has rsultd in tangibl changs. Exampls includ shifting invstmnts toward nrgy fficincy masurs, low-carbon initiativs, nrgy purchass, and th dvlopmnt of low-carbon product offrings. Som companis cit th usfulnss of an intrnal pric on carbon in making th businss cas for low-carbon invstmnts, as it can improv th rturn on invstmnt (ROI) or an invstmnt s payback priod. This signifis a distinct shift in th us of intrnal carbon pricing: from an input in invstmnt dcisions to on that dirctly supports th xcution of climat targts. { 08 1 Anothr 1,223 companis did not rspond to th intrnal carbon pricing qustion (CC2.2c/S2.2c).

9 Corporat carbon pricing: 2016 in numbrs 23% incras from prvious yar 732 planning 1,249 total 517 pricing now 37 disclosing impact 147 mbdding in climat stratgy 3,234 not pricing 500+ potntially at rgulatory risk Intrnal carbon pricing: driving chang in businss practics Th imag to th lft illustrats th brakdown of CDP s global sampl of companis into stags of th intrnal carbon pricing procss: In th planning stag, 732 companis ar considring whthr an intrnal carbon pric can assist th businss s stratgic approach or oprations, or how thir businss should us a pric on carbon. 517 companis ar alrady utilizing an intrnal pric as an accounting and risk managmnt tool. Of ths, 147 companis ar taking this approach a stp furthr to actually mbd th pric as part of a stratgy to achiv an stablishd climat targt. 37 companis ar rporting tangibl rsults against targts. Companis not pricing Ovr 3,200 companis disclosd to CDP that thy do not us an intrnal pric on carbon and do not plan to adopt this approach in th nxt two yars.¹ Ovr 500 of ths ar in high-mitting industris (as opposd to th 370 in th sam industris who ar adopting a pric) with approximatly 400 bing hadquartrd in countris who ar ithr considring, ar currntly implmnting, or hav alrady implmntd, a pric on carbon. Th numbr of companis potntially at risk is likly to b vn largr givn th multinational natur of many of ths companis and th widr sctoral covrag of som carbon taxs. As data around carbon xposur continus to improv, invstors may qustion th risk-prpardnss of ths companis for climat rgulations. 1,223 not diclosing thir practic 09

10 Sctoral trnds This yar, 5,759 companis rspondd to CDP s 2016 climat chang and supply chain information rqusts. About on in fiv companis (1,249) disclosd that thy intrnaliz a carbon pric now, or plan to do so in th nxt two yars. Th graphic blow illustrats all companis who rspondd to th intrnal carbon pricing qustion,¹ arrangd in GICS Sctors, according to whthr thy rportd that thy us an intrnal pric on carbon now ( pricing now ) or plan to pric in th nxt two yars ( pricing by 2018 ). Companis who rportd that thy do not us an intrnal pric on carbon now and do not plan to adopt this practic in th nxt two yars, ar also citd ( not pricing ). 1 Data sampl only includs companis that rspondd to th intrnal carbon pricing qustion (CC2.2c/S2.2c). Th Utilitis and Enrgy Sctors hav th highst proportion of companis rporting that thy ar adopting a pric on carbon 63% of all Utilitis Sctor disclosrs and 52% of all Enrgy Sctor disclosrs. This compars with th Tlcommunication Srvics 40%, Matrials 35%, Financials 31%, Information Tchnology 25%, Consumr Stapls 24% and Industrials 23%, Consumr Discrtionary 22%, and Halth Car 19%. 99 Companis pricing vs. not pricing, by GICS sctor Pricing now Pricing by 2018 Matrials Not pricing Consumr Discrtionary Information Tchnology Enrgy Industrials Financials Consumr Stapls Tlcommunication Srvics Utilitis Halth Car 10

11 Rgional trnds As th intrnational community movs towards implmnting th Paris Agrmnt, carbon pricing is sn by many as a ky mchanism driving missions rductions in th privat and public sctor. 2 2 World Bank and Ecofys Carbon Pricing Watch 2016 (May), Washington, DC. Doi: Licns: Crativ Commons Attribution CC BY 3.0 IGO. 3 Carbon Pricing: Th Paris Agrmnts Ky Ingrdint, IETA, and EDF Putting a Pric on Carbon with a Tax, World Bank. Rtrivd: contnt/dam/worldbank/documnt/sdn/ background-not_carbon-tax.pdf 5 Mapping Carbon Pricing Initiativs 2013 rcivd financial support from th CF-Assist Program, managd by th World Bank Institut (WBI) 6 Businss for Climat Platform Emissions Trading Systm EPC ETS. Cntro d Estudos m Sustntabilidad da EAESP and EPC Intrnational Carbon Action Partnrship (ICAP). China to cap missions from six sctors, ETS to launch ICAP. July 4, To dat, 180 nations hav signd th Paris Agrmnt, agring to limit global avrag tmpratur ris to wll blow 2 C compard with pr-industrial lvls. Ovr half of thos national govrnmnts plan to us carbon pricing and othr markt mchanisms to achiv thir missions rduction goals, as statd in thir nationally dtrmind contributions (NDCs). 3 This yar s rportd incras in companis intrnalizing or planning to intrnaliz a carbon pric is prvalnt in all rgions. Th ris is most vidnt in Brazil, China, India, Japan, Mxico, th Rpublic of Kora, and th U.S. It is still too arly to tll whthr ths changs com as a rsult of corporat ractions to th Paris Agrmnt, pric signals from national policis, or whthr thy ar indicativ of a nw corporat norm. Th numbr of U.S. companis rporting th us of an intrnal carbon pric continus to incras yaron-yar. In 2014 only 29 companis rportd using an intrnal carbon pric; today 80 ar pricing, with an additional 130 planning to implmnt on within two yars. Mxico and Brazil also xprincd larg jumps. Mxico has had a carbon tax on som fossil fuls sinc 2012 and rcntly announcd th potntial dvlopmnt of an missions trading schm (ETS) that would b implmntd in In th past yar, th numbr of Mxican companis pricing carbon has doubld. For som tim, th World Bank has rportd that a trading schm is undr considration 5 in Brazil, but this has yt to b confirmd by Brazilian policymakrs. Evn without dfinitiv policy signals, th privat sctor has bn prparing. On initiativ brings togthr mor than 20 major Brazilian companis to simulat an ETS with liv company data. 6 This, alongsid th data trnds sn this yar, suggsts that Brazil is a markt to watch. Japan has also sn a significant incras in companis rporting that thy us, or plan to us, an intrnal carbon pric. Th country has had a carbon tax (which currntly stands at just ovr $2) on th us of fossil fuls sinc 2012 and an ETS systm in plac in th city of Tokyo sinc This approach to managing climat risk appars to b rising up th corporat agnda in India. Th Indian govrnmnt has in plac a numbr of policis that snd pric signals into th conomy around carbon missions, such as th coal css (tax) and th nw nrgy fficincy schm, Prform, Achiv and Trad (PAT). Chins companis hav startd to mobiliz. This coms against th backdrop of China piloting missions trading in four citis, two provincs and th spcial conomic zon of Shnzhn sinc 2013, ahad of th plannd introduction of a national schm in Early stimats suggst that up to 50% of China s GHG missions will b covrd by this schm, rprsnting a significant incras in th covrag of carbon pricing globally. According to rcnt rports, thr ar ight sctors which will b includd in th national systm, namly ptrochmicals, chmicals, building matrials, iron and stl, non-frrous mtals, papr production, lctricity gnration and aviation. 7 Embdding carbon costs into businss stratgy will bcom a ncssary part of doing businss in China for ths and rlatd sub-sctors in futur yars. { Notabl rgional incrass Country 2015 total 2016 total Incras from Brazil % China % India % Japan % Mxico % Rpublic of Kora % % 11

12 Policy and carbon pricing Who prics carbon around th world? NORWAY 5 CANADA 47 EUROPEAN UNION RT A 385 AL BE BRITISH COLUMBIA QUÉBEC SWITZERLAND RGGI* CALIFORNIA MEXICO BERMUDA 26 1 GUATEMALA COLOMBIA 1 14 COSTA RICA 2 ECUADOR 2 BRAZIL 47 PERU 2 AUSTRIA 5 BELGIUM 5 CZECH REPUBLIC 3 DENMARK 9 FINLAND 10 FRANCE 56 GERMANY 49 GREECE 5 HUNGARY 2 IRELAND 11 ITALY 24 LUXEMBOURG 3 NETHERLANDS 17 POLAND 4 PORTUGAL 6 SLOVAKIA 1 SPAIN 37 SWEDEN 14 UNITED KINGDOM 124 NIGERIA 1 SOUTH AFRICA 44 Existing policis Emrging policis ARGENTINA 4 Numbr of companis in ach country that rport using, or planning to us, an intrnal carbon pric. * Rgional Grnhous Gas Initiativ: U.S. Stats of Conncticut, Dlawar, Main, Maryland, Massachustts, Nw Hampshir, Nw York, Rhod Island, and Vrmont CHILE 4

13 RUSSIA 3 ESTONIA LATVIA REPUBLIC OF KOREA LITHUANIA CHINA UKRAINE KAZAKHSTAN TURKEY JAPAN 104 TAIWAN ISRAEL 1 1 TOKYO TIANJIN JORDAN EGYPT 1 SAITAMA PROVINCE BEIJING UNITED ARAB EMIRATES 2 KYOTO GUANGDONG PROVINCE INDIA SHENZHEN 44 THAILAND HONG KONG 10 6 CHONGQING PROVINCE HUBEI PROVINCE PHILIPPINES 4 MALAYSIA SINGAPORE 6 2 INDONESIA 3 AUSTRALIA 37 NEW ZEALAND 3 Carbon pricing policy information sourc: World Bank and Ecofys Carbon Pricing Watch 2016 (May), Washington, DC. Not: Implmntd policis r-catgorizd as xisting, and schduld policis and policis undr considration r-catgorizd as mrging. 13

14 Disclosd prics by rgion Intrnalizing policy prics Canada Carbon prics by company, $USD/mtric ton $ UK carbon pric floor $25.71 Qubc CAT $12.60 Albrta SGER $15.33 BC carbon tax $22.99 Unitd Kingdom Carbon prics by company, $USD/mtric ton $ Currnt or impnding policy rgulations ar snding strongr pric signals to a numbr of markts throughout th world. This yar s data shows that companis appar to b rsponding by pgging thir intrnal carbon prics to policy pric signals.¹ Intrnal carbon prics usd by companis in Canada rsmbl th pric lvls st by Provincial policis oprating in Québc, Albrta and British Columbia. Québc has a GHG cap and trad systm in plac with th currnt pric at around $ Albrta s carbon tax is around $ British Colombia s tax is $23. A national carbon pricing systm is also undr considration.² In South Africa, narly all disclosd corporat carbon prics follow th rang of prics ($3.27 $8.17) rlasd by th National Trasury Dpartmnt in rspct of th South African carbon tax. In th Rpublic of Kora, companis ar pgging thir prics to th prvailing markt pric within thir nwly stablishd ETS. A rang of prics may mrg in th futur, as som companis incras thir intrnal prics, particularly thos with oprations in othr countris or thos mbdding carbon risk mor dply into thir businss stratgy. Whil a clar pattrn is not vidnt in th prics that Japans companis disclos, many companis rport that thir intrnal pricing practic is influncd by th Tokyo ETS. A vast rang of prics ar usd by companis in Europ, coinciding with th varity of policis that oprat in th rgion, as wll as a history of activ ngagmnt by companis on climat. Currntly, 12 carbon tax systms, som of which hav bn in plac sinc 1990, sit alongsid th EU and Swiss mission trading systms, th UK s carbon pric floor, and th Frnch govrnmnt s plans to introduc a pric floor for th lctricity sctor. Notably, UK company prics ar trnding at th lvl of th UK s pric floor, around $25.70 in Thr is littl consistncy in th pricing procss and pric lvls among U.S. companis. Prics start as low as >$1 and rang as high as $150. Companis rportd rfrncs to th EU ETS and Californian Cap and Trad systm, ithr bcaus thy fall undr thir complianc, or in ordr to modl potntial futur pricing scnarios in th absnc of a fdral carbon pric. Othrs intrnaliz implicit carbon prics that alrady affct thir businss including nrgy pric forcasts, allowanc prics, costs of nrgy fficincy standards, all mannr of nvironmntal and rlatd complianc costs, and vn costs that might rsult from th U.S. Clan Powr Plan. This yar, two U.S. companis, Amrn Corporation and Covanta Enrgy Corporation, disclosd intrnalizing th U.S. Environmntal Protction Agncy s social cost of carbon. { 1 Corporat prics hav bn convrtd to USD/mtric ton, basd on an annual avrag xchang rat from Jun 2015 Jun Som companis disclos a rang, or multipl, intrnal carbon prics diffrntiatd by varying colors in th bar graphs abov. 2 Carbon pricing policy information sourc: World Bank and Ecofys, Carbon Pricing Watch 2016 (May), Washington, DC. (policy prics in USD basd on April 1, 2016 xchang rat) 14

15 Japan Carbon prics by company, $USD/mtric ton Europan Union Carbon prics by company, $USD/mtric ton $ Tokyo and Saitama ETS $31.19 $ EU ETS $5.92 South Africa Carbon prics by company, $USD/mtric ton $ $ South African Carbon Tax (phas-in pric) $3.27 Koran ETS $16.12 South African Carbon Tax $ Rpublic of Kora Carbon prics by company, $USD/mtric ton

16 A maturing practic Embdding an intrnal pric on carbon into businss stratgy This sction of th rport discusss th trnd of 147 companis that ar maturing in thir us of an intrnal pric on carbon. 16 Ovr 90 % of disclosing companis statd that climat chang poss an inhrnt risk to thir businss Ths companis ar using an intrnal carbon pric to implmnt or achiv an stablishd climat targt, allowing thm to furthr mbd climat chang considrations into businss dcisions. A sris of cas studis xamin th xprinc of svn companis that us this approach. Each study focuss on th company s ovrall approach to managing climat chang risks and opportunitis, and th rational for adopting a pric on carbon. Thy xamin how th pric is mbddd into businss stratgy to achiv implmnt or achiv climat targts. Th companis covrd ar hadquartrd in Europ, Japan, South Africa, and Turky and com from a rang of sctors. Almost all of th companis hav committd to stting scinc basd targts or disclos that thy anticipat doing so in two yars. Th cas studis rly upon information disclosd by th companis in rspons to th 2016 climat chang information rqust and furthr information supplid by th companis in subsqunt intrviws conductd by CDP. Managing climat risks and opportunitis Ovr 90% of disclosing companis statd in thir 2016 disclosurs that climat chang poss an inhrnt risk to thir businss. Ths companis highlightd a varity of risks, drivn by changs in th physical climat or rgulations concrning climat, that hav th potntial to gnrat a substantiv chang in businss oprations, rvnu, or xpnditur. Th majority of ths companis no longr simply track climat-rlatd risks but also includ thm in risk and opportunity analyss, thrby intgrating climat chang considrations into ovrall businss stratgis. Companis sking to oprationaliz climatconscious businss stratgis typically turn to climat targts that lowr risks by cutting missions and thir associatd costs. Climat targts can ncompass GHG missions rductions, nrgy fficincy, and rnwabl nrgy procurmnt goals among othrs. Som targts ar xprssd as aspirations to achiv carbon nutrality or to gain a comptitiv dg in th markt for co-frindly products and srvics. Smartly dsignd climat targts can rduc th burdn associatd with xisting or futur climat chang rgulations. A growing numbr of companis, 147, hav disclosd that thy ar adopting an intrnal pric on carbon in th implmntation of climat-conscious businss stratgis. Ths companis dscrib intrnal carbon pricing as a ky drivr in th xcution of climat targts spcifically pointing to th ralizd or anticipatd impacts on invstmnt dcisions that would lad to missions rductions. Exampls of this approach ar providd in th cas studis that follow. Companis idntify intrnal carbon pricing as an ffctiv tool in a numbr of ways, including: 1. It provids an incntiv or addd rason to rallocat rsourcs toward low-carbon activitis such as nrgy fficincy improvmnts, missions rductions, and rnwabl nrgy procurmnt ovr highcarbon activitis. Applying a carbon cost to such invstmnt dcisions supports a bttr rturn on invstmnt, thus crating a clar businss cas for thir xcution. Cas study xampls (p ): Arçlik, Harmony Gold Mining, Nissan, Novartis, Royal DSM, Saint- Gobain, SUEZ. Othr xampls: Sky Plc and Cummins Inc. Sky Plc Consumr Discrtionary, Unitd Kingdom [Sky uss] an intrnal pric of carbon to hlp us mak dcisions on th invstmnts w mak in nrgy fficincy and on sit rnwabl nrgy in addition to standard simpl pay back and Invstmnt Rats of Rturns (IRR) to hlp build a mor robust businss cas in invstmnts mad, particularly for th cas of on-sit rnwabl nrgy whn simpl pay backs ar typically longr than othr businss invstmnts mad Exampls of whr this has bn usd is in th invstmnt of on-sit rnwabls at our sit in Ostrly, Wst London, whr w hav invstd in xcss of 7m in a Combind Cooling and Hating Powr Plant (CCHP), 100KW wind turbin and PVs. Typically simpl pay backs for ths on sit rnwabls would b btwn 6 11 yars but whn th cost th intrnal pric of carbon is includd in th rviw including CRC costs, FIT tariffs and EU Emissions Trading thn th invstmnt is a mor positiv on ovr th long trm. Cummins Inc. Industrials, An intrnal pric of carbon is usd whn valuating funding of nrgy fficincy projcts Cummins is still at th stag of its nrgy fficincy projcts whr th pric of carbon is usually not a dtrmining factor in whthr a projct is fundd. Thr ar instancs, howvr, whn a projct may not hav a high rturn on invstmnt or mt othr financial hurdls but dos avoid a significant amount of GHGs, so projct may thn gt fundd in that way.

17 2. It is usd in dtrmining th businss cas for R&D invstmnts ncssary for nw low-carbon products and srvics; a priority for companis sking to cut missions from th manufacturing procss and attract nw businss from customrs intrstd in low-carbon, low-cost solutions. Cas study xampls: Saint-Gobain, SUEZ. Othr xampls: Anglo Amrican Platinum, Vina Concha y Toro SA. Anglo Amrican Platinum Matrials, South Africa Amplats mploys an intrnal pric of carbon for: Planning and justifying climat-rlatd invstmnts; Stimulating rsarch and dvlopmnt of PGM rlatd low carbon tchnologis such as ful clls; Idntifying and prioritising climat chang-rlatd risks and opportunitis; Incntivising fficincis across th businss; Buffring th impact of South Africa s proposd carbon tax; Gaining a long trm comptitiv advantag; and Engaging with supplirs on climat chang stratgis and grnhous gas rduction masurs. Vina Concha y Toro SA Consumr Stapls, Chil Viña Concha y Toro viws this intrnal pric of carbon as a ky stratgic lmnt, a practic that will mak all of our businss units awar of th impact w hav and how w can hlp fight Climat Chang. W also hop to hlp thm undrstand how Climat Chang can affct our own businss. Naturally, w xpct this intrnal carbon pric to stimulat innovation in our products and procsss, driving comptition and stimulating invstmnt in low carbon tchnologis. Intrnally, this carbon pricing works as a fund. 3. Assigning a financial valu to both mittd and avoidd carbon missions hlps rval hiddn risks and opportunitis in a company s own oprations and in its supply chain. This is particularly rlvant for companis navigating an array of carbon pricing rgulations bcaus thir oprations span multipl countris. Cas study xampls: Arçlik, Harmony Gold Mining, Nissan, Novartis, Royal DSM, Saint-Gobain, SUEZ. Othr xampls: Autodsk Inc., Kring. Autodsk, Inc. Information Tchnology, Autodsk blivs in taking bold action on climat chang. Stting an intrnal pric on carbon will not only nabl bttr dcision-making by aligning our own businss and invstmnts with a low-carbon conomy, but will also hlp us bttr undrstand and support our global customrs to rimagin, rinvnt, and rcrat th built world for vryon Kring Consumr Discrtionary, Franc Sinc 2012, Kring has bn working on th cration and dploymnt of its Environmntal Profit and Loss account (EP&L), th statd objctiv givn in 2012 bing to covr 100% of th Group s activitis by 2015 Th EP&L is an innovativ tool dsignd to assss impacts and rlianc on natural rsourcs. It maks it possibl to attribut a montary valu to th Company s nvironmntal impacts throughout its supply chain. Th EP&L is covring 6 indicators among which is GHG missions Carbon pricing and montization of othr ky nvironmntal indicators ld th Group to xplor nw sourcing stratgis for ky raw matrials { 17

18 Carbon pricing is alrady dlivring chang For th first tim, companis rportd sing a dirct link btwn pricing of carbon missions and th dlivry of a tangibl chang. A group of 37 companis alrady rport actual impacts on thir businss as a rsult of adopting an intrnal carbon pric. For xampl, som companis disclosd an intrnal carbon pric affcting budgt allocations or th cration of a nw businss function. It also impactd invstmnts, shifting capital towards nrgy fficincy masurs, low-carbon initiativs, nrgy purchass, and product offrings. This signifis a rising awarnss that corporat carbon pricing can driv activitis and invstmnts that dirctly support th xcution of climat targts. Whil most companis ar at th arly stags of this approach, thir xprincs illuminat a notworthy trnd, and prhaps an mrging bst practic, in th corporat us of intrnal carbon pricing.{ Businss stratgy dlivring climat outcoms Objctiv: Climat-alignd businss stratgy Implmntation tool: Carbon pric Effctiv carbon risk managmnt Emissions rductions Enrgy fficincy and rnwabl nrgy invstmnts Nw low-carbon products and srvics 18

19 EXAMPLES ENGIE Utilitis, Franc Th Group uss intrnal rgional carbon pric snsitivs to assss its invstmnts projcts Th impacts of carbon pricing scnarios on th nw invstmnt projcts proposals ar rviwd in light of th spcific contxt of th host country and of its rgulatory framwork, and inform dcision making. In 2015, th Group dcidd to no longr pursu nw dvlopmnts in coal, bliving that a carbon pric will stadily b stablishd in th world s various rgions and that coal-fird powr plants will b advrsly affctd in th futur. Socit Gnral Financials, Franc...th Group is on of th first banks to hav implmntd in 2011 an Intrnal Carbon Tax, currntly amounting to EUR 10 pr ton mittd. Th procds raisd in th businss lins ar usd to fund intrnal nvironmntal fficincy initiativs. Th goal of this schm is to show that nvironmntal masurs ar also opportunitis to crat valu and innovation for th bank Ovr th thr yars of this schm s xistnc, all 119 winning initiativs, involving building, IT, papr, transport or wast (sinc 2015), nabld annual rcurring savings of an avrag of EUR 13 million on ovrhads, an avrag of 4,700 tonns pr yar of CO ² and an avrag of 30 GWh of nrgy savings. Microsoft Corporation Information Tchnology, Th carbon f affcts invstmnt dcisions by providing both an incntiv and th financial justification for intrnal fficincy initiativs In FY15, th carbon f fund was usd to support invstmnts in: a. 14 intrnal fficincy initiativs that othrwis likly would not hav takn plac, for a projct liftim rduction of $596,395 and mtco ². b. 2,699,210 MWh in grn powr in th Unitd Stats, arning Microsoft th U.S. Environmntal Protction Agncy (EPA) s Grn Powr Partnrship as th numbr two purchasr in th Unitd Stats. c. 18 carbon offst projcts in 16 countris to rduc narly 550,000 mtco ² and support th dvlopmnt of a low-carbon conomy in mrging nations. Bouygus Industrials, Franc Th intrnal pric of carbon is only concrning Bouygus Batimnt IDF s scop. This carbon fund is a Bouygus Construction projct which rsultd in th cration of a guid for co-frindly altrnativs. In 2015, thanks to th carbon fund, which was bing tstd, two construction projcts wr subsidisd in which low carbon co-frindly altrnativs could b usd. On of th projcts usd low-carbon concrt and th othr an altrnativ nrgy production mthod basd on a hat pump drawing nrgy from gry watr. TD Bank Group Financials, Canada Th larnings from our carbon nutrality and intrnal pric on carbon hav also drivn an incrasd commitmnt to dvloping a rang of low-carbon financial products including th financing for rsidntial rnwabls and nrgy fficincy projcts, insuranc for hybrid and lctric vhicls, and th issuanc of a $500 million grn bond. 19

20 Cas study Novartis GICS SECTOR Halth Car ANNUAL REVENUE US $49,414,000,000¹ Intrnal pric on carbon: $100 USD/mtric ton Enrgy fficincy & rnwabl nrgy Emissions rductions Emissions rduction targt² Absolut targt by 2020, 30% rduction and by 2030, 50% rduction of Scop 1 and 2 missions from 2010 baslin. Rportd missions (2015) Scop 1 533,736 mtric tons CO ² Scop 2 (location-basd) 1,085,252 mtric tons CO ² Scop 2 (markt-basd) 829,375 mtric tons CO ² Baslin missions (2010) Scop 1 617,909 mtric tons CO ² Scop 2 (location-basd) 1,062,041 mtric tons CO ² Scop 2 (markt-basd) 962,836 mtric tons CO ² Hadquartrs: Basl, Switzrland 1 All annual rvnu in USD, 2016 disclosur yar.rtrivd Sptmbr 15, 2016 from Bloombrg trminal. 2 Companis may hav othr missions rduction targts in addition to thos listd in ths studis. Novartis rports that climat chang could rsult in incrasd prics for ky inputs such as watr and nrgy, and xtrm wathr vnts could significantly impact supply chains or damag facilitis. Thy ar also at risk of incrasing costs linkd to th carbon missions associatd with thir manufacturing facilitis. Rcognizing this, Novartis discloss that it has dcidd to mbd climat chang into its corporat stratgy and has st itslf th targts of rducing combind Scop 1 and Scop 2 GHG missions by 30% by 2020, and 50% by 2030 from its 2010 baslin. Ths targts hav bn st basd on th blif that govrnmntal schms can only b succssful if privat sctor companis activly contribut with targts for thir own global oprations and products. Novartis is includd in th EU ETS with svral production sits locatd in EU mmbr stats. Th company nots that so far this has not drivn up oprating costs and Novartis has bn abl to sll surplus allowancs thanks to th succssful nrgy fficincy programs implmntd at ths sits. Yt thy highlight that this is likly to chang as th systm undrgos rform and as othr countris follow suit. Th company discloss that thy support th tru cost of carbon bing mbddd within th conomy, whthr through carbon taxs or cap and trad schms, as a tool that will b ffctiv in mitigating climat chang. For this rason and to hlp achiv thir climat goals, Novartis dcidd in 2015 to st an intrnal carbon pric of $100 USD/mtric ton of CO ². Thy rport that thy basd th amount on th World Bank's cost of climat chang to socity calculations. Using its carbon pric similar prics wr valuatd for othr nvironmntal impacts Novartis quantifid its ntir nvironmntal footprint in montary trms, whn participating in a pilot application of th rcntly launchd Natural Capital Protocol. Through this xrcis, Novartis was abl to stimat its global nvironmntal Profit and Loss for its own oprations and for its matrial supply chain. Novartis nots that thy bliv stting an intrnal pric on carbon will hlp idntify projcts that can cost-ffctivly rduc GHG missions, and will driv invstmnts into aras such as nrgy fficincy and using rnwabl nrgy sourcs to powr thir oprations. Th Ral Estat and Facilitis Srvics tams will prioritiz projcts that will hlp Novartis mt its 2020 GHG missions rduction targts, and th projcts will b approvd by top managmnt. Currntly, Novartis is invstigating projcts that could hlp rduc GHG missions by up to 185,000 mtric tons CO ². A major off-sit wind and svral on-sit solar powr purchas agrmnt options ar part of this valuation. Th company nots that an intrnal pric on carbon is hlping Novartis idntify projcts that rduc GHG missions, and gnrat a rturn on invstmnt.{ 20

21 Cas study SUEZ GICS SECTOR Utilitis ANNUAL REVENUE US $16,799,980,000 Enrgy fficincy & rnwabl nrgy Low-carbon products Emissions rductions Emissions rduction targt Absolut targt by 2030, 30% rduction of Scop 1 and 2 missions from 2014 baslin. Rportd missions (2015) Scop 1 6,364,728 mtric tons CO ² Scop 2 1,790,762 mtric tons CO ² Baslin missions (2014) Scop 1 6,086,997 mtric tons CO ² Scop 2 1,796,765 mtric tons CO ² Hadquartrs: La Défns, Franc Within its climat roadmap, SUEZ announcd a nw businss stratgy that prioritizs actions that will nabl th businss to mitigat th causs and adapt to th consquncs of climat disruption. SUEZ has st a targt of 30% rduction of Scop 1 and Scop 2 combind missions by 2030, using its 2014 missions as a baslin, as wll as an objctiv to rach 60 million mtric tons of CO ² avoidd for its customrs on th priod through wast and wastwatr rcovry. Th company nots that a cntral componnt of its nvironmntal commitmnts is support for a rliabl xtrnal pric on carbon, which it says will rinforc th markt of rcycld products and acclrat th dvlopmnt of wast tratmnt activitis in dvloping countris. Additionally, SUEZ has adoptd an intrnal pric on carbon this yar. From now on, SUEZ committd to tak into account carbon pricing signals within its invstmnt dcisions and its rsarch and dvlopmnt programs to acclrat th implmntation of circular conomy, th only modl of growth which can structurally rduc grnhous gass missions. Jan-Louis Chaussad, CEO highr) pric will hlp orint rsarch and dvlopmnt towards lss carbon-intnsiv tchnologis. A third approach will consist of systmatically masuring th prformanc of th company s low-carbon products and srvics and calculating th associatd carbon goodwill, in ordr to dmonstrat thir bnfits compard to altrnativs. This way, SUEZ blivs that it can incntiviz clints to choos low-carbon options by rvaling cost savings and GHG missions avoidd or rducd and thus hlp thm to achiv thir mandatory or voluntary carbon commitmnts. Whil at th group-lvl th intrnal pric on carbon is a nw innovation, som parts of SUEZ s businsss hav mployd this tool for som tim. SUEZ nots that in th cas of Bristol Watr, it has hlpd th company to navigat th Unitd Kingdom's Carbon Rduction Commitmnt, which applis a carbon tax of 16 pr mtric ton CO ². Using an intrnal carbon pric has hlpd Bristol Watr to manag and rduc its carbon tax bill by prioritizing invstmnts that rduc nrgy us. SUEZ says that th pric is also linkd to Bristol Watr s goal to rduc its missions by 75% by To mt this targt, th company uss a shadow pric of carbon to driv invstmnts in low-carbon tchnologis. For xampl, it ld to th dcision to install nw watr pumps that offr suprior nrgy prformanc. Th pric improvd th rturn on invstmnt that could b ralizd as a rsult of making th invstmnt. { SUEZ rports that it will us a pric on carbon in thr ways. On pric will apply to capital invstmnt dcisions to bring GHG missions prformanc as a concrt critrion in projct invstmnts, incrasing long-trm profitability of low-carbon solutions. Anothr (significantly 21

22 Cas study Saint-Gobain GICS SECTOR Industrials ANNUAL REVENUE US $43,981,860,000 Emissions rductions Enrgy fficincy & rnwabl nrgy Low-carbon products Emissions rduction targt Intnsity targt by 2025, 20% rduction of Scop 1 and 2 missions from 2010 baslin at iso-production. Rportd missions (2015) Scop 1 9,528,115 mtric tons CO ² Scop 2 (location-basd) 3,619,635 mtric tons CO ² Baslin missions (2010) Scop 1 12,976,886 mtric tons CO ² Scop 2 (location-basd) 4,461,638 mtric tons CO ² Hadquartrs: Courbvoi, Franc Saint-Gobain, a Frnch multinational building matrials manufacturr, discloss that an intrnal pric on carbon will b usd as a dcision support tool to prioritiz and manag CO ² action plans. Th company discloss that its CO ² approach faturs a st of group-wid climat goals, including its currnt intnsity targt of cutting 20% of GHG missions by 2025 from a 2010 baslin, and a nw st of scinc-basd missions rduction targts that ar currntly undr dvlopmnt. Introducd in arly 2016, Saint-Gobain highlights that it xpcts an intrnal pric on carbon will impact its CO ² rduction targts through th us of it in: Masuring and incorporating th currnt and anticipatd futur impacts of rgulatory carbon prics into th company s risk managmnt stratgy; Idntifying growth opportunitis in low-carbon innovations, and rdircting capital xpnditur and R&D in lin with nw opportunitis; and Managing priority actions to rduc CO ² missions. Stting ambitious carbon pricing lvls that ar in lin with Saint-Gobain s objctivs contributs to rinforc our commitmnt to fight for th climat. Pirr-André d Chalndar, Chairman and CEO Saint-Gobain discloss that it will us two prics to dnot th two ways in which a pric on carbon will b applid in th businss. On carbon pric will b applid to capital xpnditur projcts abov a crtain thrshold, to nrgy sourc invstmnts, and to nrgyrlatd invstmnts at th company s currnt sits that consum mor than 10GWh annually. In its disclosur to CDP, Saint-Gobain rports that a carbon pric will b usd in th stratgy and plans of its plants that ar includd in th EU ETS in ordr to incntiviz invstmnt in nrgy fficincy quipmnt so as to manag a worst cas scnario that, aftr 2020, it no longr rcivs fr allowancs undr th EU ETS, which would lad to highr oprational costs. Anothr carbon pric, markdly highr, will b usd to driv invstmnts in R&D that will acclrat th dlivry of brakthrough tchnologis. Saint- Gobain rports that th us of a pric on carbon in this mannr will b instrumntal in its businss plan to incras markt shar in nrgy-saving products for xisting-building and nw-building markts. Saint-Gobain rports that its intrnal pric on carbon will b applid to all corporat activitis across 66 countris (many of which ar not prsntly subjct to rgulatory pricing) and will impact th company s scop 1, 2 and 3 missions. { 22