How do I set an internal carbon price for my company?

📌 Key Points

• An internal carbon price assigns a monetary value to each metric ton of CO₂ emitted, in order to factor climate costs into investment and purchasing decisions.
• Two approaches predominate: the notional price, which is used to prioritize projects, and the internal charge, which actually levies a fee per metric ton emitted.
• The right price level is not just a symbolic figure: it is aligned with the actual future cost of CO₂—ETS allowances, border taxes, and rising energy costs.
• Without a reliable GHG inventory, it is impossible to set a credible price: you can only price something properly if you measure it accurately.
• An integrated suite such as Decarbo’Solution® links emissions measurement to their economic valuation—from Decarbo’Inventory® to Decarbo’Target®—on a single data platform.

The short answer

Setting an internal carbon price involves assigning a value in euros to each metric ton of CO₂ emitted and then incorporating that value into the company’s decision-making process. The process consists of four steps: measuring emissions, choosing a method (notional value or actual contribution), setting the level based on the expected CO₂ cost, and then applying it to investment decisions. The right level is not merely symbolic: it is an estimate of what each unit emitted will actually cost in the future.

📗 Definition

The internal price of carbon is the monetary value that an organization voluntarily assigns to its greenhouse gas emissions to guide its decisions. It makes visible a cost that is currently diffuse—the future climate bill—and allows for economic-based decision-making between a low-emission project and a high-emission project.

What Is an Internal Carbon Price?

A metric ton of CO₂ already has value, even when it remains invisible: the carbon market, border taxes, rising energy costs. The price makes this cost explicit and places it at the heart of decision-making, before it is imposed from outside.

💜 Did you know?

Thousands of companies around the world are already using this type of pricing model to guide their investments. The tool is by no means theoretical: it transforms future exposure into an immediate decision-making factor.

An economic value, not a stance

Putting a price on carbon means recognizing that every metric ton emitted has an impact on the bottom line, either immediately or in the long run. This approach is not merely a public relations gesture; it is a decision-making tool that allows us to compare the value of a euro invested with that of a metric ton of emissions avoided.

A signal that guides decision-making

By increasing the cost of emission-generating options, this signal steers decisions toward low-emission solutions. A project that initially seemed costlybecomes profitable once emissions are priced. It acts as an internal benchmark that anticipates the external market signal.

Ways to secure it

There is no single way to do this. The table below summarizes the two main approaches and their uses.

The hypothetical price, for the sake of argument

The notional price, or benchmark value, is a theoretical value used in profitability calculations. It does not result in any payments, but virtually increases the cost of the projects in question. It is the ideal tool for comparing two investments on a climate-neutral basis.

The internal contribution, to finance

The internal levy charges a fixed amount per metric ton emitted, which goes into a fund dedicated to the transition. Each department pays for its emissions, and the funds collected finance emission reduction projects. The mechanism promotes accountability and frees up resources.

🌱 Steps for implementing an internal pricing structure:

• measure emissions by activity and by service;
• choose between a fictitious price, an actual contribution, or a combination of the two;
• set the level based on the expected cost of CO₂;
• incorporate value into decision-making tools and budgets;
• Revise the rate annually in accordance with the target trajectory.

⚠️ Warning

A price that is too low sends no signal and does not influence any decisions. A price that is out of step with the actual future cost exposes the company to unpleasant surprises when market conditions or tax policies catch up with reality. The price must be ambitious and subject to revision.

What rate level should be used?

That is the crucial question. A credible internal price is based on the actual cost that each metric ton will represent in the future, not on a convenient figure chosen simply to avoid change.

Align with the actual future cost

Plusieurs repères existent : le tarif du quota sur le marché européen du carbone, le niveau de taxation attendu aux frontières, les trajectoires recommandées pour limiter le réchauffement. Caler ce niveau sur ces références, c’est anticiper la charge que l’entreprise subira de toute façon.

💜 Did you know?

The price of carbon on the European market has risen sharply in recent years. A company that had adopted an ambitious pricing structure early on saw its strategic decisions vindicated; those that had settled for a symbolic price had to urgently revise their choices.

A flexible rate, not fixed

The target level is not set in stone. It rises over time, as constraints tighten and the path to reduction becomes clearer. A rate that is revised annually remains consistent with market realities and regulatory requirements.

From Measurement to Development: The 360° Approach

This is precisely the logic behind Decarbo’Solution®: starting with a single data point and bringing it to life, from measurement all the way to economic value creation. The Decarbo’Inventory® module calculates the GHG footprint and identifies the largest sources—the essential foundation for fair pricing. For a business leader, this is first and foremost a financial asset: a robust assessment reassures bankers and investors, not just regulators.

Building on this foundation, Decarbo’Target® sets specific, time-bound targets and quantifies the reduction trajectory, which serves as the basis for determining the tariff level. Decarbo’Commit® then promotes these commitments to financial stakeholders. The idea is not to pile on tools, but to start from a single foundation—from measuring emissions to translating them into euros.

📗 Definition

The economic value of carbon refers to the financial implications of emissions: the cost of each unit emitted, the economic benefit generated by each metric ton of emissions avoided, and future exposure to market forces and taxation. Establishing such a value makes it visible and actionable in everyday life.

Use Case. An industrial group wanted to decide between two production lines: one that was energy-efficient but more expensive to purchase, and the other that consumed more energy but was less costly. By applying an internal rate aligned with the expected load on the European market, the energy-efficient option became the most profitable over the equipment’s lifespan. This rate resolved a trade-off that the purchase price alone had made difficult to decide.

📊 From constraint to opportunity: A well-calibrated internal pricing structure does more than just demonstrate a commitment to climate goals. It directs capital toward projects that are profitable in the long term, anticipates tax liabilities, and protects margins. This isn’t a compliance issue—it’s a line item on the income statement.

Setting an internal carbon price is not a theoretical exercise reserved for large corporations. It is a management tool that brings to light an exposure that is still diffuse and directs capital toward the right projects: measure emissions, choose a method, set the price based on future actual costs, and then apply it to decision-making.

The approach remains the same at every stage: measure first, optimize next, and refine over time. Such a pricing strategy is not a voluntary burden: when well-designed, it serves as insurance against future costs and a driver of profitability.

That is exactly what Decarbo’Solution® offers: a suite that links emissions measurement to their economic value and reduction trajectory, all based on a single data foundation. From Decarbo’Inventory® to Decarbo’Target® and Decarbo’Commit®, each module helps companies turn carbon into a source of cash.

👉 Want to know what level to set for your internal carbon price and where it can generate savings as early as this year? Find out how Decarbo’Solution® supports businesses at www.decarbosolution.com.

FAQ

What is an internal carbon price?

This is the value in euros that a company voluntarily assigns to each metric ton of CO₂ emitted, in order to factor the climate cost into its decisions. It can be a notional value, used solely for calculations, or a real amount, collected as an internal contribution.

What is the point of setting such a price?

To make a cost that is currently diffuse more visible and to steer decision-making toward energy-efficient solutions. This rate anticipates rising carbon market prices and taxation, thereby protecting future profit margins.

What rate should be used?

A level aligned with the expected actual cost: the European emissions allowance price, border taxes, and climate targets. A price that is too low sends no signal; an ambitious price that can be revised annually is more useful.

Is a GHG assessment necessary to set an internal price?

Yes. You can only set a price for what you measure. A reliable GHG inventory identifies emission sources and provides a credible baseline for making sound decisions.

Which Decarbo’Solution® module should I start with?

Use Decarbo’Inventory® to conduct a GHG inventory and identify the largest emission sources, then use Decarbo’Target® to quantify the reduction pathway and set the internal rate.

Decarbo’Solution® — the carbon SaaS solution that generates cash. www.decarbosolution.com