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In the wake of environmental protection and awareness creation, many businesses have found that integrating conservation measures in business activities helps win the sustainability status. One of the pressing environmental issues has been carbon emission, and numerous companies have made it their responsibility to see that they cut carbon emission, implement sustainable decisions and help reverse or at least recover the lost percentage of the earth and atmosphere (Abboud 2). One way most companies have found effective is the internalization of externalities is through the concepts of internal carbon costs. These prices set a monetary value on greenhouse gas released. Consequently, companies can factor these prices in their investment decisions and operation. The article Companies Are Moving Faster than Many Governments on Carbon Pricing by the Economist looks into the current business environment about carbon emission and reports on how businesses have taken internal carbon prices as the initiative towards cutting emission rates. The article Companies Are Moving Faster than Many Governments on Carbon Pricing demonstrates that internal carbon pricing is an effective strategy for not only reducing carbon emission but also achieving efficiency, innovativeness and social support necessary for business growth and development.
Summary of article’s findings
According to the article, more than 1,400 business today have implemented the concept of carbon pricing in their operations to help curb global warming (The Economist 1).

The number is a total of 607 firms that currently use carbon prices internally and about 287 that have pledged to introduce it in in the next two years (The Economist 2). This is after climate-related data from 6,100 firms revealing that many voters, governments, and investors currently supports carbon pricing as an alternative to both carbon tax and cap-and-trade systems (The Economist 2).
Corporate bosses usually implement carbon pricing in two ways. One is by paying their fees into a central pool according to their carbon footprints (The Economist 3). In explanation of this, the article provides an example of Microsoft Inc. that charges all its departments for dirty energy practices. Consequently, employees and their executives ensure they cut emission. For example, executives can reduce the number of flights or distance to reduce the charges thus cutting the emission. The other way is by use of shadow prices to using government-mandated tax (The Economist 4). Finally, the article reveals that attempts to reduce emission lead to investments in research and development units, participation in international agreements, policy implementation and consultation with the government.
Apart from the business firm, the article reveals that more than 81 countries have so far pledged their support and dedication to 2015 Paris Agreement on limiting global warming (The Economist 5). In doing so, the article recommends adoption of clean energy. Such a strategy is aimed at motivating investors, firms, and voters to promote the reduction of carbon reduction.
Externality as an uncontrolled variable
Uncontrollable variables are those factors that can have influences on the business in a changing environment. These influences can be either macro or micro factors. The macro factors include economics, demographics, government, and culture, all that can have positive or negative impacts on business. As mentioned above, an externality is a business issue that can affect a business if not addressed. An externality is a cost incurred by the third parties such as society, ecosystems, and atmosphere other than those in production, distribution, and consumption of a product (Abboud 3). As a variable in a business environment, it can improve business profitability when measures to internalize it are in place. Based on environmental economics, these externalities can help a business attracts customers, investors, low energy costs and even improve compliance with the regulations.
The article Companies Are Moving Faster than Many Governments on Carbon Pricing demonstrates how business prevents environmental externalities caused by firms in their day-to-day activities through reduction of carbon emission and adoption of clean energy. It explains that many firms continue to implement internal carbon pricing since it has become popular and effective in achieving sustainability in businesses (Hodes and Sami 40). Also, government influences how firms participate in carbon reduction. The government can enforce laws that penalize those who emit too much carbon or incentives that encourage firms to reduce emission rates.
Micro factors include customers, marketers, producers and the public. These too can help in addressing externalities a business may present to the society. For example, consumers can shift to buying products that do not emit to the environment or consume much energy. Similarly, marketers and producers can focus on goods that do not degrade the environment in their life cycle. Consequently, firms producing goods and services will achieve the lowest levels of emission that are inevitable.
Ways carbon pricing changes the way business is conducted
By adopting internal carbon pricing, businesses are affected in some ways in some ways as discussed here below. One, firms are forced to adopt clean energy such solar, hydro, and wind power that emits no carbon substrates in the atmosphere. Second, they are forced to audit their processes and workflow systems to identify areas they can cut the use of energy. This can be followed by redesigning the processes for efficiency. For example, encouraging employees to travel short distances or minimizing the number of times they fly as in the case of Microsoft Corporation Inc.
Third, the company can adopt new technologies that generate less waste, consume less energy, and promotes ecological health. For example, a firm can choose to reduce the use of papers and use computer-based systems. Moreover, carbon pricing can change the ways businesses conform to government regulations. Therefore, firms implementing internal carbon prizing improve their compliance with the set laws and the standards. Finally, the carbon pricing strategy necessitates having an effective research and development unit (The Economist 7) that can be in constant lookout for alternative technologies and upcoming ones of business usage and prosperity.
Also, consumers, producers, and marketers can help firms achieve lowest carbon price at the micro level by adjusting their choices and behaviors when buying goods and services (Hodes and Sami 97). Consequently, businesses will be forced to adopt the carbon pricing policy together with other strategies for sustainability. The ultimate of all these efforts will be reduced emissions and improved efficiency in production.
Conclusion
In brief, carbon pricing is the best strategy firms can adapt to identify the instances of positive changes for both efficiency and profitability while at the same time improving compliance, public relations and innovativeness required in business. For this reason, many business organizations and individuals are moving towards its implementation at internal levels thereby achieving relevance and competitive advantage. According to the article Companies Are Moving Faster than Many Governments on Carbon Pricing, more than 1,400 firms will be using this economic concept in the next two years. The benefits they are likely to have include efficiency, increased market shares, high level of compliance, and productive membership in international institutions such as Carbon Pricing Leadership Coalition. However, this will require many businesses to change the way they carry out activities and consider new strategies such as research and development unit, redesigning of processes, and adoption of cleaner energy.
Works Cited
Abboud, Leila. “Economist Strikes Gold in Climate-Change Fight.” The Wall Street Journal, Dow Jones & Company, 13 Mar. 2008, www.wsj.com/articles/SB120535230851631199.
Hodes, Glenn, and Sami Kamel. Equal Exchange: Determining a Fair Price for Carbon. United Nation Environmental Programme, 2007, http://cd4cdm.org/Publications/Perspectives/FairPriceCarbon.pdf.
The Economist. “Companies are moving faster than many governments on carbon pricing.” The Economist, The Economist Newspaper, 11 Jan. 2018, www.economist.com/news/business/21734487-nearly-1400-firms-globally-combined-revenues-7trn-already-use-or-soon-will-internal.