Carbon Price: One simple way to reduce business travel emissions

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Carbon Tax One simple strategy to reduce your business travel carbon emissions

By Julien Etchanchu, Senior Director, Sustainable Collaboration

Many experts believe a high carbon price is an important tool for reducing greenhouse gas emissions.

However, while implementing a carbon price (also called a carbon tax) is not a new concept, it is not widely used by companies today. To compare the effectiveness of different sustainability tools, Climate Interactive, in collaboration with MIT, developed EN-ROADS, a simulation that allows you to virtually compare different sustainability strategies to understand their impact on curbing rising temperatures. Based on this simulation, it is clear that the most effective tool is a high carbon price. So, what could a carbon price in business travel look like? First, let’s understand why it can make such a big difference.

Why a carbon price?

As NASA climatologist Peter Kalmus writes, “Global warming is a failure of the market economy. Fossil fuels generate an additional cost for society (global warming, respiratory diseases, etc.), not included in the price of fuel”. More generally, the negative effects of a purchase are never taken into account in the price or in the calculation of GDP. Whether it’s cutting down a forest, burning coal, or polluting our oceans to produce a product, we currently aren’t held accountable for these damaging activities.

Because of this, many economists are now looking into the creation of more global indicators that would take into account societal and environmental aspects in the definition of cost. And for the environmental part, putting a price on carbon appears to be one of the best solutions.

What would this look like for business travel

Today, price is typically the deciding factor during travel purchase decisions. For example, on a Paris-Shanghai flight, you may opt to take a connecting flight if it’s cheaper than flying direct. But if the direct flight emits 2 tons less CO2, shouldn’t this also be a consideration? Following this example, let’s assume the direct flight is $150 more expensive, and that we had set a carbon price of $100 per ton in our travel policy. We can estimate that the “environmental cost” is $200 higher for the connecting flight. So, the “real” total cost (conventional price + environmental impact) of the trip is $50 more expensive for the connecting flight. Therefore, establishing an internal carbon price is an excellent way to arbitrate between cost and carbon emissions and to incentivize your travelers to prioritize sustainable options.

A great example of this practice in action is with one of our clients, LinkedIn. They have just introduced an internal carbon price of $60 per trip. As their travel manager, Leslie Hadden, points out, “it is time to no longer look at price as the only tangible indicator, but to take environmental externalities into account.” She also believes that this tax is “an excellent way to educate travelers, in order to make them realize the impact of their trip, and, ultimately, to travel less. It is also a good way to raise funds to finance sustainable development projects, within or outside our value chain.”

Finally, by establishing an internal carbon price, we are potentially preparing for the future. It is possible that in the near future, companies will have to pay for their CO2 emissions. This is already the case for energy companies in Europe (ETS system), and there are predictions that this system could soon be extended to the transport sector. We can only expect that the next step would be a generalization of this tax to all companies.

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Current challenges

While the potential of the carbon price is beyond doubt, its implementation can come up against a couple of pitfalls:

First, to be useful, the price of carbon must be high, around $100 per ton. If it’s too low, it may give a false impression that a few dollars will allow us to be “neutral” and that our environmental impact is minimal. Keep in mind, this price must be completely independent of your carbon offsetting costs, which are often far too low today. To be effective, two carbon prices must co-exist, one to accurately represent offsetting costs and the other to be used as the internal tax when booking travel.

Additionally, we must create a collective momentum, generating internal support so that this tax is understood and adopted. A clear communication strategy with your travelers is key to the success of implementing a carbon price. During the booking process, the funds collected should be clearly identified so that everyone understands what the money will be used for.

“We want to create real support for this project. This price should not be seen as a punishment but as a contribution. Embracing the positives is absolutely crucial for the success of this project as well as for the fight against climate change,” Leslie Hadden shared.

Ready to bring a carbon pricing strategy into your business travel program? Our team can help! Contact our sustainable collaboration team here.

This article was originally published in French on:

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