Internal carbon pricing: Origins, determinants, and the impact of governance

Mathieu Gomes, Hania Khursheed and Sylvain Marsat

Chapter 7 in Handbook on Corporate Governance and Corporate Social Responsibility, 2024, pp 81-90 from Edward Elgar Publishing

Abstract: In this chapter, we review the origins and determinants of Internal Carbon Pricing (ICP). Specifically, we discuss the various forms ICP can take and the objectives it purports to achieve. We then make use of the Carbon Disclosure Project (CDP) database to derive empirical facts linked to adoption, price setting, and the role governance mechanisms can play with respect to ICP. Our analyses reveal that firm-level exposure to climate-related risks is a significant driver of ICP adoption. We further show that ICP adoption is mostly a response to regulatory risks exposure, while exposure to physical impacts does not have any influence. Finally, we find that board independence increases the likelihood of ICP adoption when the corporation faces climate change exposure.

Keywords: Business and Management; Economics and Finance; Environment; Politics and Public Policy General Academic Interest; Sustainable Development Goals (search for similar items in EconPapers)
Date: 2024
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