THE BLOG
09/24/2014 01:12 pm ET Updated Nov 24, 2014

Business to Play a Key Role on Carbon Pricing

Thomas Trutschel via Getty Images

A price on carbon that reflects the toll that fossil fuels are taking on the planet and its inhabitants is probably the most salient step that can be taken to limit greenhouse gas emissions and get ahead of the climate change curve. It sends a signal to businesses and investors that renewable energy and low-carbon projects are, in fact, very profitable, and it sets a level playing field that does not penalize early actors.

Governments are starting to shoulder their responsibilities. National and regional markets that set a fair price on carbon are spreading, and in all regions. By 2015 they are likely to cover lands with more than half the world's population, according to informed estimates. Just this month, China announced a 2016 roll out of a national market that would dwarf that of the current leader, the European Union. Carbon taxes -- an alternative means of adjusting carbon prices -- are also on the rise.

But these governmental steps will effectively be for naught if they don't force feed innovation and implementation that will produce energy solutions on a transformative scale. With governments preparing for a major UN summit on climate change this month, the potential for progress in the private sector cannot be ignored.

With business already responsible for the bulk of climate finance flows, and producing far and away the greater part of global GDP and jobs, its active support will be key to sealing any deal that governments make, or to move ahead if negotiations falter. Moreover, corporate engagement and advocacy can be pivotal factors in disarming climate-skeptical outlooks.

Companies have long played a role in climate change, both as polluters as well solution providers. They have interacted with policy makers at national and international levels, and a growing number have embraced carbon disclosure and re-directed investment to low carbon outlets. Unfortunately, the reduction in emissions has been small in comparison with their overall carbon footprint.

Recognizing the handwriting on the wall, in terms of rising governmental restrictions on carbon usage and the major damage that unhindered climate change can wreak on their operations and financial futures, major corporations are already trying to determine what the future fair cost of carbon will be, and incorporating it in internal planning. A 2013 CDP study found that over 100 companies, most of them major energy producers and/or users, are incorporating such estimates to help identify risks and opportunities and as an incentive for enhanced energy efficiency

A large number of major companies are preparing to take action on carbon pricing, in particular by signing up to the "Business Leadership Criteria on Carbon Pricing" put together by Caring for Climate, a coalition of nearly 400 companies. The pledge entails three dimensions: integrating carbon pricing into corporate long-term strategies and investment decisions, responsible policy advocacy on the importance of carbon pricing, and communicating their progress publicly over time.

The latter two criteria are essential. The unfortunate truth is that some companies are making behind-the-scenes efforts to hold back regulatory changes, including those that would place a price on carbon. Too many are still talking out of two sides of their mouth - supporting cleaner regimens in their sustainability statements, while lobbying through proxies and front organizations for the freedom to pollute.

Companies should become leaders on this issue. It marks them as pioneers on a principle that will benefit all the people of the world. Not incidentally, these people who will benefit are also their customers, investors and employees. Moreover, a world of dependable access to natural resources and prosperous consumers protected from climate change is essential for their futures. Early action thus includes a fair share of long-term self-interest.

An opportunity to transform how corporations align their sustainability agendas with positive government policies is coming up soon.

At the September UN Climate Summit in New York, government, business and investors, along with civil society and intellectual leaders, will join forces. Major companies will endorse the leadership stance on carbon pricing, and a complementary "Statement on Putting a Price on Carbon" developed by the World Bank Group and other partners will call for countries and companies to demonstrate strong global support and action in this area.

In addition to carbon pricing, at the Summit companies will bring new and ambitious commitments to action to the table. The major breakthroughs on energy and emissions have come from privately and state-owned enterprises -- from vastly improved energy efficiency and packaging techniques, to solar energy panels, electric automobiles, LED lights and other innovations with high upside potential.

With the right public policy frameworks, and with business stepping forward to meet its responsibilities and its own long-term interests, these steps are just the beginning. Further momentum on carbon pricing and corporate action will undoubtedly carry over to negotiations that are set to conclude in Paris in 2015, hopefully with a binding international agreement on climate change.

This post is part of a month-long series produced by The Huffington Post in conjunction with a variety of events being held in September recognizing the threats posed by climate change. Those events include the UN's Climate Summit 2014 (that was held Sept. 23, 2014, at UN headquarters in New York) and Climate Week NYC (Sept. 22-28, 2014, throughout New York City). To see all the posts in the series, read here.