Internal Carbon Pricing AN EXPLORATORY CASE STUDY ON THE IMPLEMENTATION OF AN INTERNAL CARBON PRICE IN A MULTINATIONAL ENTERPRISE

Abstract

Climate change is often considered a market failure in the field of economics as the risks and costs are not reflected in the market price. Many scientists and actors in the field therefore argue that the cost must be internalized to properly discount these risks and costs. Internal carbon pricing (ICP) bridges the gap, effectively allowing companies to take responsibility for their carbon emissions. Responding to calls for studies of ICP implementation, this thesis expands on the ICP literature through an in-depth case study of Volvo Cars. Data triangulation is applied, allowing for a nuanced evaluation of how the commercial- and procurement business units respond to the implementation. The results of this thesis shows that the most central prerequisite for a successful implementation is access to rigorous and structured data, regardless of the pricing mechanism applied. Furthermore, this thesis finds that the specific price have limited impact if the foundation of the ICP is not properly in place. Therefore, the ICP in itself is not as important as the behavior that it motivates. Moreover, the suitability of ICP differs between the business units studied as a result of the difference in how they operate, where this thesis advocates for a stronger effect on the procurement unit as it allows for a company to internalize emissions on a component level.