Cost of change: carbon budgets vs. carbon taxes
This company innovates by setting a carbon budget translated into an additional financial envelope, which will be used to pay a carbon tax on business travel.
The idea was developed because the travel manager (who requested anonymity) and his CFO perceive disadvantages with traditional carbon budgets and taxes. They believe the challenge with the former is that travelers struggle to visualize a ton of carbon or how harmful it can be. The problem with carbon taxes, the travel director said, is that “say you have $50 on top of your flight and instead of paying $1,000, you pay $1,050. No one don’t care about $1,000, so why would they care about $1,050?
Instead, this company will calculate the carbon emissions of each of its teams from 2019 and convert them into a financial budget at a rate of $50 per metric ton. Each month, the emissions on air travel booked by this team will be calculated (by the company’s TMC, using DEFRA methodology), again converted at the same rate to a financial figure, and then deducted from the carbon financial budget. The amount deducted from the carbon financial budget will also be invested in carbon reduction projects.
The intention is that each year the price of carbon per ton will be increased from its initial level of $50 but, above all, “the teams’ carbon financial budgets will not increase on a pro rata basis, so this will cause them to travel less “said the travel manager.
However, he added, punitive measures for exceeding the financial carbon budget will be added gradually. “We will communicate that they went over budget, but in 2023 no one will be stopped from flying because they have no money left. It will be a learning exercise to change people’s mindset. ultimately it’s a matter of ownership.
The company uses the same booking tool as Siemens UK and is also frustrated with its shortcomings in supporting sustainability strategies. “When I was talking to our CFO I said, ‘Don’t ask me to put this on the booking tool, it’s not possible’,” he said. “I think we should tell people how much they have in their carbon budget, but there are very few technology providers who can do that.”