As of 2025, 1,753 companies worldwide have adopted internal carbon pricing (World Bank Group, 2025). This figure not only signals the rapid evolution of Internal Carbon Pricing (ICP) from a management tool used by early adopters into a mainstream practice among global enterprises, but also reflects a growing maturity in how businesses perceive carbon-related risks. As governments continue to roll out carbon regulations, carbon costs are no longer a distant assumption—they have become quantifiable, foreseeable, and increasingly capable of directly affecting profitability and competitive positioning.
Against this backdrop, a growing number of companies are implementing internal carbon pricing as a critical bridge between sustainability strategy and financial decision-making. By internalizing “carbon” as a priced factor within investment evaluations, operational management, and product strategies, organizations can better anticipate the impacts of future carbon cost fluctuations and strengthen their financial resilience in a high–carbon-cost era.
As global climate governance continues to tighten, carbon pricing has become a core policy instrument for achieving net-zero targets. To date, more than 95 jurisdictions worldwide have formally implemented compliance-based carbon pricing mechanisms, including carbon taxes and emissions trading systems. Together, these mechanisms cover approximately 14.7 billion tonnes of CO₂e emissions under global carbon pricing frameworks.
Regional carbon policies are deepening and increasingly shaping corporate operating environments. In the European Union, carbon prices under the EU Emissions Trading System (EU ETS) have shown a sustained upward trend, while the Carbon Border Adjustment Mechanism (CBAM) has entered its charging phase and will be fully implemented in 2026, requiring imported products to bear the cost of their embedded carbon emissions. In the United States, subnational carbon markets remain the primary drivers, with both California’s cap-and-trade program and the Regional Greenhouse Gas Initiative (RGGI) seeing annual carbon price increases exceeding 10%, steadily strengthening carbon cost signals. Asian markets are also rapidly taking shape: China’s national carbon market now covers more than 4.5 billion tonnes of emissions, while Singapore, Japan, and South Korea have successively established carbon tax or emissions trading systems.
Carbon pricing is no longer limited to the EU or other major economies. In Taiwan, a domestic carbon pricing framework is set to formally enter its implementation phase. Starting in 2025, the government will begin levying carbon fees, with the first phase targeting large emitters with annual emissions exceeding 25,000 tonnes of CO₂e. Covered sectors include energy, steel, petrochemicals, cement, semiconductors, and other key industries, with impacts expected to extend across supply chains and export-oriented industries. Under current plans, the initial carbon fee rate will start at NT$300 per tonne.
Beyond regulatory drivers, international and domestic sustainability initiatives and assessments are also strengthening the momentum for adopting ICP. Participation in benchmarks and disclosure frameworks—such as the** DJSI Best in Class Index**, CDP Climate Change disclosures, or IFRS S2 (aligned with Taiwan’s Financial Supervisory Commission roadmap for adopting international sustainability disclosure standards)—encourages companies to disclose climate-related risks and carbon management strategies, including internal carbon pricing. In addition, Taiwan’s Corporate Governance Evaluation has introduced internal carbon pricing as a new indicator starting in 2025, underscoring the growing importance of this topic in the local market.
From the global expansion of carbon pricing to the upcoming implementation of carbon fees in Taiwan, internal carbon pricing has become an inevitable trend in corporate strategy and management. By internalizing carbon costs, ICP supports decarbonization investments, operational efficiency, and supply chain management, while ensuring that corporate decisions remain aligned with net-zero objectives—making it a core tool for maintaining competitiveness and resilience.
Internal Carbon Pricing (ICP) is a corporate management tool used to internalize the cost of greenhouse gas emissions and integrate it into decision-making processes. As defined by the World Bank, internal carbon pricing refers to companies “setting an internal price on greenhouse gas emissions to guide their decision-making related to climate change impacts, risks, and opportunities.” In simple terms, ICP translates carbon emissions into financial metrics,enabling companies to weigh carbon costs alongside economic returns in investment, operations, and supply chain management.
When adopting internal carbon pricing, companies can choose different approaches based on their management maturity and needs. These approaches range from simple to more advanced and generally fall into four main categories:
An implicit price does not take the form of an actual charge. Instead, carbon costs are indirectly reflected in decision-making assumptions, such as incorporating carbon factors into energy or raw material cost calculations. This approach is suitable for companies at an early stage of ICP adoption, or for business units with relatively low emissions that are seeking an initial understanding of carbon-related risks.
A shadow price incorporates carbon costs into financial models to assess their impact on return on investment (ROI) and payback periods. While it does not directly affect departmental budgets, it helps senior management account for carbon risks in long-term strategic decisions.
Under an internal carbon fee mechanism, companies charge business units based on their actual emissions and allocate the collected revenue to low-carbon funds or reinvest it in decarbonization projects. This approach directly incentivizes emissions reductions at the operational level and is well suited for companies aiming to demonstrate concrete decarbonization commitments and establish mechanisms that drive behavioral change.
Internal emissions trading involves establishing an internal carbon allowance and trading system, where business units can trade emission allowances within a defined cap. This is the most complex approach, but it enables market-based management of carbon costs and encourages innovation. It is particularly suitable for large, multi-division, multi-site, or multinational organizations with widely distributed emissions and a need for flexible allocation of decarbonization responsibilities.
Implementing Internal Carbon Pricing (ICP) is a cross-functional, strategic management initiative that can be structured into five key steps:
Define the emissions scope and decarbonization targets, and form a cross-functional task force involving finance, sustainability, and operations. Secure alignment from senior management and the board to ensure organizational support.
Select the appropriate ICP approach and determine price levels based on regulatory requirements, industry benchmarks, internal abatement costs, and external research. Carbon prices may vary by region, project type, or emission source.
Establish clear rules for how carbon costs are incorporated into daily decisions, capital expenditures, and project evaluations. For shadow pricing, define applicable scenarios and calculation methods.
Roll out ICP in phases, starting with pilots or shadow pricing and gradually moving toward a full internal carbon fee. Link ICP to performance management and strengthen internal carbon awareness.
Regularly assess the effectiveness of carbon pricing and update mechanisms based on external carbon markets, policy developments, and evolving business strategies.
Delta began introducing internal carbon pricing in 2014, initially applying a shadow price approach at selected operational sites. In 2017, Delta further established a unified global internal shadow carbon price of approximately USD 50 per tonne. By 2021, Delta formally implemented an internal carbon fee mechanism, setting a globally consistent internal carbon price of USD 300 per tonne, with business units required to pay carbon fees based on their actual emissions. Revenue from these fees is allocated to a dedicated “carbon fund” and reinvested in projects such as renewable energy procurement, energy efficiency improvements, and low-carbon innovation and R&D.
In terms of energy efficiency initiatives, Delta implemented a total of 410 energy-saving projects in 2023, of which 377 were supported by ICP—reflecting a more proactive approach than in 2022. These efforts delivered cumulative electricity savings exceeding 48 million kWh, equivalent to approximately 36,297 tonnes of carbon reduction. In parallel, Delta has strategically linked various renewable energy solutions with its internal carbon fee mechanism, encouraging sites to prioritize on-site consumption and bundled renewable energy certificates. Through the collective efforts of regional teams worldwide, the share of renewable electricity usage across global operations reached 76% in 2023, continuing steady progress toward the 2030 RE100 target of 100% renewable electricity.
When companies seek to implement internal carbon pricing, they commonly face three major challenges.
Beyond endorsement from the board and senior management, the effective implementation of ICP requires support from employees and business units across the organization. If certain departments raise objections to the internalization of carbon costs or the level of the carbon price, implementation friction and execution gaps may arise, undermining overall decarbonization outcomes.
A lack of accurate emissions data—particularly for indirect emissions—limits the precision of carbon cost internalization and weakens the quality of decision-making and analysis.
Without sufficient external benchmarks or internal cost baselines, companies often struggle to determine a reasonable carbon price, which in turn affects the strategic direction and incentive effectiveness of ICP.
Establishing an internal carbon pricing system is only the first step. The next challenge for companies lies in how to operationalize ICP and transform it into a sustained strategic and execution tool. Carbon price setting, cross-functional collaboration, emissions data integration, and the incorporation of carbon costs into investment decisions and capital expenditures are all complex issues commonly encountered in practice.
Throughout the ICP implementation journey, our consulting team provides end-to-end, tailored support—from the upstream foundations of carbon management to on-the-ground decarbonization execution. For companies that have not yet completed a comprehensive carbon inventory, we first help assess their current carbon footprint by evaluating direct and indirect emissions, while** clarifying the needs and challenges of different departments**. Based on these insights, we design an ICP framework that aligns with the company’s characteristics and facilitates internal consensus.
During the system design phase, we support organizations through training programs and workshops, working closely with teams to build cross-departmental alignment, define an appropriate carbon price, and develop practical implementation strategies and execution processes. We also provide regular review and adjustment recommendations to ensure that carbon pricing remains effective, continuously optimized, and aligned with evolving policies, carbon markets, and technological developments.
To translate ICP into tangible decarbonization outcomes, we help companies use it as a decision-making tool—internalizing carbon costs and linking them to concrete Scope 1, 2, and 3 reduction initiatives, such as energy efficiency improvements, renewable energy adoption, and supply chain decarbonization programs. Through this comprehensive approach, companies can institutionalize carbon management while effectively advancing low-carbon transformation and net-zero goals, strengthening organizational resilience and market competitiveness.
