The cost of carbon

Understand the impact of carbon pricing on the commodities sector

Carbon pricing is coming. Is your business ready?

Carbon pricing is the mechanism by which governments capture the external costs of carbon emissions, such as the result of heat waves and droughts or flooding and sea level rise, and tie them to the original emitters. Due to the spread of carbon pricing schemes (see the carbon regulation map below) and the inevitable rise of the price of carbon, the commodities sector — the highest emitting industry in the world — is now faced with discontinuing high-emission activities, reducing emissions or continue business as usual and pay an increasing price for their emissions. This unavoidable trend is disrupting the economics of global supply chains and is the main factor in your organization’s carbon risk.

The impact of carbon pricing

Additional costs in a $110 per tonne carbon price scenario, compared to 2019 commodity prices [Wood Mackenzie, 2020, Frank et al 2017]

+$130 (40%)
chart-45
Alumina
2019 price c. $330/t
+$1,200 (67%)
chart-67
Aluminum
2019 price c. $1,800/t
+$200 (34%)
chart-34
Finished Steel
2019 price c. $600/t
+$300 (19%)
chart-19
Copper concentrate
2019 price c. $1,600/t
+$1,770 (80%)
chart-80
Beef
2019 price c. $2,200/t
+$190 (45%)
chart-45
Rice
2019 price c. $420/t

Carbon regulation map

Carbon pricing initiatives adopted through legislation

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