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

In: Handbook on Corporate Governance and Corporate Social Responsibility

Author

Listed:
  • Mathieu Gomes
  • Hania Khursheed
  • Sylvain Marsat

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.

Suggested Citation

  • Mathieu Gomes & Hania Khursheed & Sylvain Marsat, 2024. "Internal carbon pricing: Origins, determinants, and the impact of governance," Chapters, in: Michel Magnan & Giovanna Michelon (ed.), Handbook on Corporate Governance and Corporate Social Responsibility, chapter 7, pages 81-90, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21347_7
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    File URL: https://www.elgaronline.com/doi/10.4337/9781802208771.00017
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