Internal Carbon Pricing — Methodology, Governance, and Calculation Approach
Two companies report the same tonne of CO₂e. One treats it as a line in a disclosure; the other attaches a price to it and lets that price move capital, kill projects, and fund abatement.
Internal carbon pricing is the mechanism that turns an emissions number into a decision — and the price you choose is a governance act, not an accounting one.
Internal carbon pricing (ICP) applies a monetary value per tonne of CO₂e to a company’s own emissions to steer investment and operating decisions. The two dominant forms are a shadow price used in appraisal and an internal fee charged to business units.
Internal carbon pricing sits between the compliance-cost layer of GHG management — where the price of carbon is set by a market or a regulator — and the strategy layer, where a company decides how much its own emissions should weigh on a decision. It is not an emission factor and does not appear in a GHG inventory total. It is a deliberate, self-imposed price that a company applies to tonnes it has already measured, so that the cost of those tonnes becomes visible at the point where money is committed. This page is the reference treatment: the mechanism taxonomy, the five ways the price is derived, the calculation logic for each engine, the governance structures that make the price bite, the reporting frameworks that ask about it, and the failure modes that turn a well-intentioned price into a rubber stamp.
Aligned to the TCFD recommendations (Metrics & Targets — internal carbon price disclosure), IFRS S2, and the CDP climate questionnaire (module C11.3). Scenario shadow-price references are drawn live from the NGFS Climate Scenarios Phase V (NGFS/IIASA, Nov 2024) via the GreenCalculus Master Brain; every price a company sets in the worked examples is a hardcoded audit record. For the statutory counterpart to a self-imposed price, see the carbon tax liability methodology; for the offset-price bridge, the carbon offset pricing methodology.
What Internal Carbon Pricing Is
Named concept · Citable definition
Internal carbon price
A monetary value, expressed in currency per tonne of CO₂e, that an organisation voluntarily applies to its own greenhouse-gas emissions in order to change internal decisions. Unlike a statutory carbon price it creates no external liability; unlike an emission factor it does not enter the inventory total. It is a decision variable applied downstream of measurement, at the point a capital, procurement, or operating choice is made.
The distinction that governs everything on this page: an emission factor answers how many tonnes, an internal carbon price answers what those tonnes should cost us to decide differently. A company measures its Scope 1, Scope 2, and Scope 3 footprint using published factors and the GHG Protocol boundary rules. Those tonnes are facts. The internal carbon price is not a fact — it is a policy lever the company sets and can change. Two companies with identical inventories can hold internal prices an order of magnitude apart, and both can be defensible, because the price is calibrated to what the company is trying to make happen, not to what actually happened in the atmosphere.
ICP versus a statutory carbon tax
An internal carbon price is frequently confused with a compliance cost, and the confusion has audit consequences. A statutory carbon tax or an emissions-trading obligation — the EU ETS, the UK ETS, a national carbon tax — produces a real cash liability settled with an external authority, and it belongs on the balance sheet. An internal carbon price produces no external cash flow. When it takes the form of a fee, the cash moves within the company, from a business unit’s budget into a central fund; when it takes the form of a shadow price, no cash moves at all. Treating an internal shadow price as though it were a real liability double-counts against any actual ETS exposure the company already carries — the first of the failure modes catalogued below.
The internal carbon price is applied to tonnes you have already counted. It never changes the inventory. It changes the decision that produces next year’s inventory. Keep it out of your emissions total and out of your statutory-liability accounting.
Why the number is a decision lever, not an emission factor
Because the price is chosen rather than measured, the whole methodology of internal carbon pricing is a methodology of calibration and governance rather than of measurement. There is no “correct” internal price in the way there is a correct DEFRA factor for diesel. There is a price that is high enough to change the decisions it is meant to change, that is defensible against an external benchmark, that is governed by a body with the authority to enforce it, and that is disclosed transparently. The five price-setting methodologies below are the recognised ways to arrive at a defensible number; the governance section is what makes the number real.
The Four ICP Mechanisms
Internal carbon pricing is an umbrella over four structurally distinct mechanisms. They differ in whether money actually moves, in where in the decision chain the price is applied, and in what behaviour they are built to change. A single company can run more than one — a shadow price on capital appraisal and a fee on operating emissions is a common pairing.
none · Best for: steering long-lived investment.
internal transfer · Best for: funding abatement, driving operational behaviour.
already spent · Best for: auditing coherence between stated and revealed price.
internal transfer · Best for: efficient abatement allocation across divisions.
The comparison matrix below is the canonical decision aid — practitioners choosing a mechanism should read it against their objective (steer investment, fund abatement, audit coherence, or allocate efficiently) rather than against price level, which is set separately.
| Criterion | Shadow price | Internal fee | Implicit price | Internal trading |
|---|---|---|---|---|
| Real cash moves | No | Yes — internal | Already spent | Yes — internal |
| Point of application | Appraisal / NPV | Operating budgets | Ex-post review | Allowance market |
| Primary behaviour changed | Investment selection | Operational emissions | None (diagnostic) | Abatement allocation |
| Funds abatement directly | No | Yes — via ring-fenced fund | No | Indirectly |
| Administrative burden | Low | Medium | Low | High |
| Governance requirement | Appraisal-gate enforcement | Fund oversight, ring-fencing | Data integrity | Cap-setting, market rules |
| CDP C11.3 category | Shadow price | Internal fee | Implicit price | Internal fee (traded) |
A shadow price and an internal fee are complements, not alternatives. The shadow price governs the projects you approve; the fee governs how the emissions you already have are managed. Running both — a common configuration in mature programmes — closes the gap between capital decisions and operating behaviour.
Setting the Price: Five Methodologies
The price level is the single most consequential parameter in an ICP programme and the one most often set by intuition. There are five recognised, defensible ways to derive it. Each anchors the price to a different reference — the company’s own abatement economics, an external regulator, the science, a transition scenario, or a target — and each produces a different number. Most mature programmes triangulate across several rather than relying on one.
| Method | Anchors the price to | Typical use | Strength / weakness |
|---|---|---|---|
| Marginal abatement cost (MACC) | The cost of the company’s own next unit of abatement | Fee calibration; internal-trading cap pricing | Directly actionable, but only prices abatement the company can already see — silent on options not yet on the curve. |
| Regulatory-anchored | An existing or expected external carbon price (EU ETS, national tax) | Companies with real compliance exposure hedging forward | Grounded in a real market, but tracks policy rather than ambition; can be too low to drive change where regulation is weak. |
| Social cost of carbon (SCC) | The modelled economic damage of a tonne of CO₂e | Companies wanting a science-anchored, damage-based number | Ethically principled, but estimates span a wide range and depend heavily on the discount rate chosen. |
| Scenario-derived (NGFS) | The shadow price implied by a transition pathway | Scenario analysis, TCFD/IFRS S2 disclosure, target-aligned appraisal | Forward-looking and disclosure-ready, but the number swings with model and scenario choice — see the bridge below. |
| Target-back-cast | The price needed to hit the company’s own decarbonisation target | Companies with an SBTi or net-zero commitment | Tightly coupled to ambition, but requires a credible abatement model to back-cast from. |
The price corridor
The most robust programmes do not set a single number. They set a corridor — a floor, a central working price, and a ceiling — and select a point within it according to the decision at hand. A long-lived capital project facing decades of tightening policy is appraised nearer the ceiling; a short-horizon operating decision nearer the floor. The corridor makes the price-setting methodologies above cohere: the floor is typically the regulatory-anchored price (what carbon costs today), the central price is scenario- or target-derived (what it will plausibly cost on the transition path), and the ceiling is the social cost of carbon or a stringent net-zero scenario (what the science or the ambition implies).
(today’s carbon price) CentralScenario / target-derived
(transition-path price) CeilingSCC / net-zero scenario
(science / ambition)
Expressed as levels rather than positions, the corridor is a composition — the floor, working price, and ceiling coexist at one point in time — which is why it is drawn as a rail, not a trend line. The illustrative levels below use the shape of a typical corridor for a diversified corporate on a transition path; the specific numbers a company chooses are its own governance decision and are hardcoded into its policy, not read from any live source.
Illustrative corridor levels for a diversified corporate — not prescriptive, not read from a live source. A company’s actual floor, central, and ceiling are set by its own governance body and hardcoded into policy. The scenario-derived central price can be anchored to an NGFS pathway using the bridge in the next section.
The NGFS Scenario Reference Bridge
The scenario-derived price-setting method needs a defensible external source for the shadow price implied by a transition pathway. The recognised reference is the NGFS Climate Scenarios (Network for Greening the Financial System, with IIASA), which publish long-term shadow carbon prices consistent with each transition pathway. GreenCalculus surfaces the NGFS Phase V (November 2024) prices live, so a company anchoring its central corridor price to a scenario can cite a value that updates when NGFS republishes rather than a number frozen in a slide.
The NGFS shadow price is model-dependent. For the Net Zero 2050 scenario at 2030, the MESSAGEix-GLOBIOM model gives roughly 257 US$/tCO₂ while the GCAM model gives roughly 102 US$/tCO₂ — the same scenario, the same year, a factor of roughly 2.5× apart. Always state the model, the scenario, and the year when you cite an NGFS-anchored internal price. The values are expressed in real 2010 US dollars per tonne of CO₂.
The table below is the reference matrix. Each cell is a live NGFS Phase V shadow price for the global-weighted region, rendered through the Master Brain. The resolver returns the bare number only — the unit (US$/tCO₂, real 2010 USD), the model, and the scenario are supplied here in prose and in the column headers, because the shortcode does not carry them.
| Scenario | Model | 2025 | 2030 | 2040 | 2050 |
|---|---|---|---|---|---|
| Net Zero 2050 ≤1.5 °C, orderly |
MESSAGEix-GLOBIOM | 0 | 257 | 319 | 461 |
| GCAM | 12 | 102 | 337 | 1260 | |
| Below 2 °C orderly |
MESSAGEix-GLOBIOM | 0 | 50 | 66 | 112 |
| GCAM | 6 | 77 | 185 | 344 | |
| Delayed Transition disorderly |
MESSAGEix-GLOBIOM | 0 | 2 | 76 | 111 |
| GCAM | 0 | 0 | 154 | 529 | |
| Current Policies hot house, >3 °C |
MESSAGEix-GLOBIOM | 0 | 2 | 3 | 4 |
| GCAM | 0 | 0 | 0 | 0 |
NGFS Climate Scenarios Phase V (NGFS / IIASA, November 2024) · global-weighted region · real 2010 US$/tCO₂ · reporting.ngfs.carbon_price.<model>.<scenario>.world.<year> · engine-default model is MESSAGEix-GLOBIOM.
A single scenario’s price is a metric tracked over time, so its trajectory is drawn as a line chart. The chart below plots the MESSAGEix-GLOBIOM Net Zero 2050 shadow-price path — the pathway most companies use as the ceiling or central anchor for a science-aligned corridor. The underlying data points are the same live NGFS values shown in the matrix, transcribed here as a static trajectory because a chart’s data axis is authored, not read live; when NGFS republishes, the matrix updates automatically and this chart is refreshed as a normal content edit.
| Point | US$/tCO₂ (real 2010) |
|---|---|
| 2025 | 42.0 US$/tCO₂ (real 2010) |
| 2030 | 257.0 US$/tCO₂ (real 2010) |
| 2040 | 552.0 US$/tCO₂ (real 2010) |
| 2050 | 606.0 US$/tCO₂ (real 2010) |
Chart values are transcribed illustratively from the NGFS Phase V MESSAGEix-GLOBIOM Net Zero 2050 pathway to show trajectory shape. The live, current figures are the matrix cells above; treat the chart as directional and the matrix as authoritative.
Calculation Logic
Each mechanism has its own calculation engine. All three share the same first input — measured emissions in tonnes of CO₂e — and differ only in how the chosen price is applied to those tonnes.
Shadow-price appraisal overlay
The shadow price is applied inside a project’s financial model. The carbon cost of each option is added to its modelled cost, changing the net present value and therefore which option clears the investment hurdle. No cash is charged; the effect is entirely on the ranking.
Eₜ = incremental emissions in year t (tCO₂e) · P_shadow = internal shadow price (currency/tCO₂e) · DFₜ = discount factor for year t. The carbon term is discounted on the same basis as the cash flows so the appraisal stays internally consistent. A rising price schedule (e.g. an NGFS pathway) uses a year-specific P_shadow,t inside the sum.
Fee-based accrual
The internal fee is a straightforward product of measured emissions and the fee rate, computed per business unit per period and aggregated into the central fund. Because it is a real internal charge, it must reconcile against the emissions inventory for the same boundary and period.
E_unit = the unit’s measured emissions for the period (tCO₂e), on the same boundary as the GHG inventory · P_fee = the internal fee rate (currency/tCO₂e). The scope of E_unit — Scope 1 only, Scope 1+2, or inclusive of material Scope 3 — is a governance decision that must be fixed before the fee is levied, or the fund total cannot be reconciled.
Corridor selection
When a corridor is in use, the applied price is selected by rule rather than fixed. The selection rule maps a decision’s time horizon and policy exposure to a point on the corridor, so a long-horizon, high-exposure decision draws a price nearer the ceiling and a short-horizon, low-exposure decision nearer the floor.
w ∈ [0, 1] is the corridor-position weight set by the selection rule — 0 at the floor, 1 at the ceiling. The weighting function is a documented governance artefact, not a free choice at the point of decision; publishing it is what keeps corridor selection auditable rather than arbitrary.
Only the fee engine touches real money, and only the fee engine must reconcile to the inventory. The shadow-price and corridor engines change rankings and selections; they never produce a cash flow and never enter a financial statement.
Governance Structures
A price with no governance is a slide, not a mechanism. The difference between an internal carbon price that changes decisions and one that is quietly ignored is entirely governance: who owns it, whether it is enforced at the gate, and — for a fee — where the money goes.
Ownership and mandate
An effective ICP programme has a single accountable owner with the authority to enforce the price at the decision gate — typically the CFO’s office or a cross-functional carbon-pricing committee reporting to the board. The mandate must be explicit: appraisals above a threshold cannot proceed without the shadow price applied; business units cannot opt out of the fee. Where ownership sits in a sustainability team with no authority over capital allocation, the price is advisory and the programme underperforms. Board-level oversight is what the TCFD governance pillar and IFRS S2 expect to see disclosed.
The fee-recycling loop
The internal fee’s power comes from what is done with the money. In the canonical configuration the fund is ring-fenced and recycled into abatement, creating a self-reinforcing loop: units pay for their emissions, the fund finances projects that cut emissions, and the payments fall as the emissions fall.
Revenue ring-fencing and the phantom-revenue risk
The fee only drives decarbonisation if the fund is genuinely ring-fenced. Two failure patterns break the loop. In the first, the fund is swept into general revenue and the “carbon fee” becomes an internal tax that funds anything — the emissions signal is lost and units correctly infer the charge is just a cost of doing business. In the second — phantom revenue — the fund is booked as income that inflates the appearance of climate action without financing any actual abatement. Both are governance failures, catalogued in the failure modes below, and both are what an ESRS E1 transition-plan reviewer looks for when a company claims an internal fee as evidence of a credible plan.
If the fee fund is not ring-fenced, the internal carbon price is a budget transfer with a green label. The behavioural signal survives only as long as business units believe the money is being spent on abatement they can point to. Publish where the fund goes.
Reporting and Compliance Integration
Internal carbon pricing is not a mandatory disclosure in its own right, but it is asked about by every major climate-reporting framework because it evidences whether a company is internalising the cost of its emissions. The integration points below are where an ICP programme surfaces in disclosure.
CDP C11.3 — the primary disclosure home
The CDP climate questionnaire asks directly, in module C11.3, whether the organisation uses an internal price on carbon, and if so, of what type (shadow price, internal fee, or implicit price), at what level, covering which scopes, and how it is applied in decision-making. CDP scoring rewards a price that is applied to a material share of the business and enforced in real decisions over one that is nominal. The CDP climate questionnaire calculator maps the ICP fields to the scoring rubric.
TCFD and IFRS S2 — Metrics and Targets
The internal carbon price is one of the cross-industry metrics the TCFD recommends disclosing under Metrics & Targets, and that recommendation carries into IFRS S2, the ISSB successor. Where a company discloses an internal carbon price, S2 expects the price, the scope of emissions it covers, and how it is used. The scenario-analysis pillar is where an NGFS-anchored shadow price is most naturally cited — the IFRS S2 disclosure methodology covers the full requirement set.
CSRD ESRS E1 — the transition plan
Under CSRD, ESRS E1 does not mandate an internal carbon price, but where one exists it is disclosed as part of the transition-plan narrative (E1-1) as evidence that capital allocation is aligned with the stated decarbonisation pathway. A reviewer treats a genuinely enforced, ring-fenced internal price as supporting evidence for a credible plan and an unenforced nominal price as immaterial.
Interaction with real carbon liabilities (EU ETS)
A company already inside the EU ETS carries a real allowance cost on its covered installations. Its internal carbon price must not double-count against that liability. The clean design applies the internal price only to emissions not already priced by the ETS — typically the Scope 2 and Scope 3 emissions outside the ETS boundary, plus any Scope 1 emissions below the ETS installation threshold — while the ETS-covered emissions carry their actual allowance cost. Conflating the two is failure mode 7.2 below. The EU ETS allowance methodology and carbon tax liability methodology cover the real-liability side.
Worked Examples — Audit Records
Three audit-record snapshots. Every price a company sets in these examples is hardcoded per editorial policy — a worked example is an audit record and its arithmetic must reconcile to the stated inputs a year from now, regardless of any future data change. Where an example anchors a price to an NGFS scenario, the anchored value is transcribed as of this page’s review date.
$1.2m NPV. The company applies a flat internal shadow price of $150 / tCO₂e (its central corridor price), discounted at the same 8% rate as the cash flows.
| Option | Base NPV | Lifetime emissions | Discounted carbon cost | Carbon-adjusted NPV |
|---|---|---|---|---|
| Gas-fired | $0.0m (ref) | 180,000 tCO₂e | −$14.8m | −$14.8m |
| Electrified | −$1.2m | 42,000 tCO₂e | −$3.5m | −$4.7m |
$50 / tCO₂e on the Scope 1+2 emissions of three units, ring-fenced into a decarbonisation fund.
| Unit | Scope 1+2 emissions | Fee rate | Fee charged |
|---|---|---|---|
| Manufacturing | 60,000 tCO₂e | $50 | $3,000,000 |
| Logistics | 25,000 tCO₂e | $50 | $1,250,000 |
| Offices | 5,000 tCO₂e | $50 | $250,000 |
| Fund total | 90,000 tCO₂e | — | $4,500,000 |
$80 / tCO₂e), the central price to the NGFS Net Zero 2050 shadow price at 2030, and the ceiling to a stringent reading of the same pathway. As of this page’s review date, the NGFS Phase V MESSAGEix-GLOBIOM Net Zero 2050 price at 2030 is ≈ $257 / tCO₂ (real 2010 USD) and the GCAM equivalent is ≈ $102 / tCO₂ — a spread the company must resolve into one central number.
| Corridor point | Anchor | Chosen value |
|---|---|---|
| Floor | Regulatory price faced today | $80 / tCO₂e |
| Central | NGFS NZ2050 @ 2030, model-blended | $180 / tCO₂e |
| Ceiling | NGFS NZ2050 @ 2030, MESSAGEix (high) | $257 / tCO₂e |
Edge Cases and Failure Modes
Six ways an internal carbon price fails to do its job. Each is named for citation and characterised by how it is detected, so a reviewer can spot the failure from the programme design without needing to interview the decision-makers.
Implementation Workflow
An eight-step sequence to stand up a defensible internal carbon price. The order matters — coverage and governance are fixed before a number is chosen, because a price set before its boundary and enforcement are decided cannot be reconciled or enforced later.
- Define the objective. Decide what the price must change — investment selection, operating behaviour, or both. This selects the mechanism (shadow price, fee, or both).
- Fix the coverage boundary. Which scopes, which units, which installations — and explicitly exclude any emissions already priced by a real ETS or tax (guards against failure modes 9.2 and 9.4).
- Assign ownership. Name the accountable body with authority to enforce the price at the decision gate, reporting to the board.
- Derive the price. Use the five methodologies to triangulate a floor, central, and ceiling — a corridor, not a single number.
- Anchor the central price. Where using a scenario, cite the NGFS reference with the model and scenario stated; document any model blend.
- Build the enforcement gate. For a shadow price, make it a mandatory appraisal input above a threshold; for a fee, make it a non-optional budget charge (guards against failure mode 9.5).
- Ring-fence the fund. For a fee, separate the fund and pre-commit it to traceable abatement (guards against failure mode 9.3).
- Set the review cadence. Schedule periodic re-pricing as the MACC and the transition pathway move (guards against failure mode 9.6), and disclose the price via CDP C11.3 and IFRS S2.
Setting an internal price to support a science-based target? Check target readiness first.
Standards Alignment
Internal carbon pricing is not itself a standard; it is asked about by the disclosure frameworks below and anchored to the scenario source in the last row.
| Standard / source | Role for internal carbon pricing |
|---|---|
| CDP Climate Change Questionnaire | Module C11.3 is the primary disclosure home — asks for price type, level, coverage, and application. Scoring rewards enforced, material pricing. |
| TCFD Recommendations | Names the internal carbon price as a cross-industry Metrics & Targets disclosure; the governance pillar expects board oversight of the price. |
| IFRS S2 | Carries the TCFD internal-price disclosure into the ISSB baseline — price, covered scope, and use in decision-making. |
| CSRD ESRS E1 | Where an internal price exists, it is disclosed in the E1-1 transition plan as evidence of capital-allocation alignment. |
| SBTi Corporate Net-Zero Standard | Target-back-cast pricing derives the price from the SBTi trajectory; an internal price is a common enabling mechanism for a validated target. |
| EU ETS | The real carbon liability the internal price must not double-count against — defines the boundary the internal price should exclude. |
| NGFS Climate Scenarios Phase V | NGFS / IIASA, November 2024. The scenario-derived shadow-price source surfaced live in the reference bridge (US$/tCO₂, real 2010 USD). |
Methodology Metadata — for Governance Documentation
Copy into your internal carbon-pricing policy or governance charter. Adjust the mechanism, price, and coverage lines to match your programme.
| Methodology | GreenCalculus Internal Carbon Pricing Methodology v1.0 (July 2026). Companion to the carbon tax liability and carbon offset pricing methodologies. |
| Mechanism | [Shadow price | Internal fee | Implicit price | Internal trading | shadow price + fee]. Applied downstream of measurement; never enters the GHG inventory total. |
| Price basis | [Single price | corridor floor–central–ceiling]. Derivation: [MACC | regulatory-anchored | social cost of carbon | scenario-derived (NGFS) | target-back-cast]. Central anchor cited with model + scenario + year where scenario-derived. |
| Coverage | [Scope 1 | Scope 1+2 | Scope 1+2+material Scope 3]. ETS-covered installations explicitly [excluded / carried at actual allowance cost] to prevent double-counting. |
| Scenario reference | NGFS Climate Scenarios Phase V (Nov 2024), [MESSAGEix-GLOBIOM | GCAM | model-blend], [scenario], global-weighted, real 2010 US$/tCO₂. Per the NGFS reference bridge. |
| Governance | Owner: [CFO office | carbon-pricing committee], reporting to [board]. Fund ring-fenced: [Yes / N/A]. Enforcement gate: [appraisal threshold | mandatory budget charge]. Review cadence: [annual / biennial]. |
| Disclosure | CDP C11.3; TCFD / IFRS S2 Metrics & Targets; ESRS E1-1 transition plan where applicable. |
Frequently Asked Questions
No. The internal carbon price is applied to tonnes you have already measured, downstream of the inventory, at the point a decision is made. It changes which decisions you take and therefore next year’s emissions, but it never alters the current inventory total, which is a factual record built from emission factors and the GHG Protocol boundary rules. Keeping the price out of the inventory — and out of your statutory-liability accounting — is the first discipline of a defensible programme.
A shadow price is notional — it is added only inside appraisal models, changing which projects clear the hurdle rate, and no cash moves. An internal fee is real — business units are actually charged for their emissions, and the money moves internally into a central fund. The shadow price governs the investments you approve; the fee governs how the emissions you already have are managed and funds the abatement that reduces them. They are complements: mature programmes often run both. See the mechanism comparison matrix above for the full split.
There is no single correct level — the price is calibrated, not measured. The five methodologies each anchor it differently: the marginal cost of your own abatement (MACC), an external regulatory price, the social cost of carbon, a transition scenario, or the price implied by your own target. The most robust answer is a corridor — a floor at today’s regulatory price, a central working price anchored to a scenario or target, and a ceiling at the social cost of carbon or a stringent net-zero pathway — selected within according to a decision’s time horizon and policy exposure. The test that matters most: is the price high enough to actually change decisions? A price below your marginal abatement cost cannot be driving abatement.
For a science-aligned price, the Net Zero 2050 scenario is the usual anchor; for a policy-realistic floor, Current Policies or Delayed Transition. The critical point is the model: the NGFS Phase V figures for the same scenario and year differ by roughly 2.5× between the MESSAGEix-GLOBIOM and GCAM models — for Net Zero 2050 at 2030, MESSAGEix gives around 257 and GCAM around 102 US$/tCO₂ (real 2010 USD). Never cite an NGFS-anchored price without stating the model, the scenario, and the year, and document any blend between models as an explicit governance decision. The live reference matrix above carries the current values.
Yes, but not on the same tonnes. Your ETS-covered installations already carry a real allowance cost, so applying an internal price to them double-counts. The clean design applies the internal price only to emissions the ETS does not cover — typically your Scope 2, material Scope 3, and any Scope 1 below the installation threshold — while ETS-covered emissions carry their actual allowance cost. This lets you extend a consistent carbon signal across the whole business without pricing any tonne twice. The interaction with real liabilities is covered in the EU ETS allowance and carbon tax liability methodologies.
The primary home is CDP module C11.3, which asks directly for the price type, level, coverage, and how it is applied. It is also a recommended TCFD Metrics & Targets disclosure, carried into IFRS S2, and — where one exists — it is disclosed in the CSRD ESRS E1-1 transition plan as evidence that capital allocation aligns with the decarbonisation pathway. Across all of these, reviewers reward a price that is enforced at a real decision gate and applied to a material share of the business over a nominal price that changes nothing.
An implicit price is the price your company has, in effect, already been willing to pay — calculated by dividing your total abatement spend by the tonnes that spend abated. Unlike the other mechanisms it is not set forward; it is revealed by decisions already taken. Its value is diagnostic: comparing your implicit price against your stated shadow price shows whether your revealed behaviour matches your declared policy. A stated shadow price of $150 alongside an implicit price of $30 is a signal that the shadow price is not actually governing decisions — a coherence check no other mechanism provides.
No. An internal carbon price is a decision signal applied to your own emissions to change what you do; an offset is a purchased instrument that claims a reduction elsewhere. A fee-based internal price may fund abatement, but that abatement is normally your own emission reductions financed by the ring-fenced fund, not third-party offsets. The pricing of offsets themselves is a separate question — see the carbon offset pricing methodology — and using offsets to satisfy an internal fee obligation, rather than reducing at source, undermines the mechanism’s purpose.