Corporate Boards Demanding Carbon Policy

Pollution

There are countless issues involved in this year’s presidential election, with a diversity ranging from topics such as education and foreign policy to others such as concerns about our impact on the environment.

One of the specific issues related to environmental concerns this year is that of carbon management, and the ways we have to better implement related policy. Carbon management has been a long-running issue across the globe, and it is one that is being pushed to the forefront by our growing concerns regarding the impacts of carbon emissions on climate change.  The solutions for managing these carbon emissions include policies such as cap-and-trade systems, taxes, subsidies, and many others. 

However, regardless of the policy being chosen, the impact that these policies can have on the companies affected must be taken into account during both the policies’ foundation, and as policies move through revisions over time.

Because of this necessity to have communication with companies being managed by emissions-management policies, the 2016 Carbon Market Survey by Thomson Reuters Commodities Research and Forecasts can be invaluable in gaining perspective. 

About The Survey

From February 24th to March 21th, 908 respondents were surveyed about their beliefs regarding emissions trading, the Paris agreements, and similar issues.  Both European and American companies were surveyed, although European countries comprised the majority of respondents.  Specifically, EU Companies that are governed by an ETS (Emissions-trading scheme) comprised the largest group of the respondents.  Companies such as these have the most vulnerability to change in emissions policies, and as such their input is essential to understanding the dynamics of implementing or revising emissions policies.

Survey Results

Emissions-trading is slowly becoming the favorable option for managing our carbon emissions, and this is no doubt due to the substantial advantage of being able to leverage the power of the market to reach an efficient, equitable solution for each company.

The 2016 Carbon Market Survey shows a 2% increase in support for emissions-trading as an ideal solution in climate policy. This is a change from 69% in 2015 to 71% this year.  8% of the respondents still believe that emissions-trading as a climate policy would do more harm than good. 

Opinions in Agreement with Emissions-Trading Policies
2015 2016
69% 71%

The survey also showed that 71% of the surveyed companies anticipate an emissions-trading policy to be enacted in their jurisdictions by 2020.   Other policies on which the companies were surveyed included subsidies (73%), taxes (54%) and regulations (27%).   These results suggest that companies are well-aware that emissions control policies will have an impact throughout their industries within the next 5 years. This may also be a signal that companies are starting to prepare for changes, which will ease the implementation of such policies.

The price of carbon is also a growing concern for the respondents, with one-third of them agreeing that carbon emissions are an important factor when making investment decisions. 

To a lesser degree 55% of the respondents still take carbon emissions into account when making investments.  Although price is a concern, most surveyed EU companies and all surveyed U.S companies are still not willing to make a change to production to avoid carbon costs. This may suggest that more time is needed before it is feasible for some companies to make significant changes to cut down carbon emissions from their production processes.  The results may also be evidence that emissions-policies require revision in order to better convince companies to enact change.

Respondents were also questioned on the topic of the December Paris Agreements, which set several pollutions goals in order to combat global warming.  In response to this, 47% stated that they were at least satisfied with the goals.  33% held a neutral position, and the remaining 21% stated that they were not satisfied.  Overall, the views on the Paris Agreements were fairly positive. 

Overview of the Paris Agreements:

  • Maintain global average temperature below 2°C above pre-industrial levels
  • Limit the temperature increase to 1.5°C
  • Global emissions should peak as soon as possible
  • To reduce emissions rapidly, after reaching the emissions peak

The Cap and Trade System

According to the survey, 35% of European respondents believe that the cap-and-trade system continues to reduce emissions, and 26% believe that it originally had a strong effect, but no longer has much impact today.  23% stated that the cap-and-trade system has not resulted in any reductions in the past nor today. It can be seen from these results that revisions to the system may be needed to maintain its effectiveness, although it still likely has a sufficient impact in certain industries.

Two-thirds of the respondents in Europe stated that the cap-and-trade system is important, but is not a main cause for worry.  In this 2016 survey, 16% stated that the system was detrimental to their companies.  Last year in 2015, 27% of respondents had stated that the policy was detrimental.  This may show an increase in acceptance or a realization that the system is not as harmful as it was once perceived.  Overall, the majority of these respondents in the survey this year did not consider the cap-and-trade program to be a significant obstacle to their competitiveness in the market. 

The data in this article was provided from the 2016 Carbon market survey by Thomson Reuters Commodities Research and Forecasts, a world-leading provider of news and analysis for the international power, gas and carbon markets.  The full report can be found here.

 

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