About Carbon Price and how to use it

What is Carbon Pricing?

Carbon pricing refers to assigning a monetary value to greenhouse gas emissions (CO₂e) in order to make their economic impact visible. It is a key instrument for integrating climate considerations into business decision-making.

There are two main types:

• External carbon pricing
  Legally defined prices (e.g. EU Emissions Trading System – EU ETS or national carbon taxes)
• Internal carbon pricing
  Company-defined prices used to guide investment and strategic decisions

While external pricing ensures compliance, internal carbon pricing enables companies to actively steer their transformation.

The European Commission describes the EU ETS as a central carbon market instrument in Europe, while the World Bank’s Carbon Pricing Dashboard provides a global overview of existing carbon pricing systems.

Carbon Pricing as a strategic instrument

Carbon pricing is more than just a reporting mechanism — it is a core decision-making model.

When used effectively, it helps to:

• steer investments
• assess climate-related risks financially
• anticipate future regulatory developments
• prioritize decarbonization measures

CDP defines internal carbon pricing as a monetary value assigned to emissions to guide decisions related to climate risks, opportunities, and investments. The WBCSD also highlights that internal carbon pricing helps bridge financial and climate perspectives.

The key mindset shift:
Emissions become costs — and reductions become economic value.

The three strategic roles of Carbon Pricing

How to set a carbon price

There is no single “correct” carbon price. In practice, companies typically combine multiple approaches:

1. Market-based prices

• Based on real market data (e.g. EU ETS)
• Suitable for short-term decision-making

2. Science-based prices

• Aligned with climate targets (e.g. Net Zero pathways)
• Often significantly higher (e.g. 100–300 €/t CO₂e long-term)
• Supports SBTi-aligned strategies

3. Internal steering prices

• Freely defined values for internal decision-making
• Often combined with increasing price pathways over time

Historical development: EU ETS carbon prices

For many companies, the EU ETS is the most relevant external benchmark. Its development illustrates why carbon pricing must be approached strategically rather than purely operationally.

Where to find carbon pricing information

For a reliable overview, companies should combine official sources, market data, and strategic references:

Regulatory sources

• European Commission – Carbon Markets
• European Commission – Market Stability Reserve
• EEX – EU ETS Auctions
• World Bank – Carbon Pricing Dashboard

Market data

• Trading Economics – EU Carbon Permits
• energy.instrat – EU ETS Prices

Carbon Pricing in the Reduction Planner

Within the Reduction Planner, carbon pricing can be transparently documented and directly used for decision-making.

The key advantage is that carbon prices are not just stored — they are integrated into the evaluation of measures.

Tool capabilities:

• Define multiple carbon prices
• Model different scenarios
• Use carbon pricing for measure evaluation and ROI calculations

Linking Carbon Pricing to measures and ROI

Carbon pricing enhances traditional financial analysis.

Without carbon pricing:

• Focus on investment and operating costs

With carbon pricing:

• Additional component: avoided carbon costs

Example:

A measure reduces:

• 1,000 t CO₂e per year
• Carbon price: 100 €/t

→ Value of reduction: 100,000 € per year

Strategic value within the tool

By combining:

• measures
• scenarios
• carbon pricing

you can:

• make robust investment decisions
• simulate future price developments
• compare measures objectively
• transparently document your climate strategy

Carbon pricing is a key lever of modern climate strategies.

Within the Reduction Planner, it becomes a practical tool:

Emissions are translated into costs — making climate action economically manageable and comparable.