Tata of India Follows Norway’s Statoil on Carbon-Price Path

  • Conglomerate sees emergence of a global carbon market
  • India seen as biggest contributor to future greenhouse gases

Tata Group, India’s biggest conglomerate, is following oil and mining companies including Statoil ASA in preparing to pay for their emissions.

Mumbai-based Tata is installing a so-called shadow carbon price in the group, which spans motor car manufacturing, information technology consulting, tea production and steel, Paul Brooks, group director environment, said by e-mail on Thursday. Tata may be ready to buy emission credits in the future, he said.

Fossil-fuel producers are among companies that already use shadow carbon prices to help ensure that future multibillion-dollar projects remain profitable as governments tighten environmental rules. Tata is piloting them progressively for its 100 companies as the Paris climate deal requires nations to cut emissions and investors lose appetite for climate-damaging projects, Brooks said. 

“Companies can’t ignore the regulation and impacts of climate change,” Martijn Wilder, head of the climate-change practice at law firm Baker & McKenzie in Sydney, said Thursday by telephone from Oslo. While the Paris climate deal is not binding on companies, it clearly shows that profits from emissions-producing activities will be constrained, which executives need to respond to, he said.

Rising Emissions

Statoil, Europe’s biggest natural gas producer, supports a global carbon price to lower emissions, according to spokeswoman Elin Isaksen. The company reconsiders its shadow price, currently $50 a metric ton of carbon dioxide, each year and hasn’t reviewed it since the Paris agreement, she said by e-mail.

The benchmark European Union carbon price fell 0.9 percent Friday to 5.66 euros ($6.37) a metric ton on the ICE Futures Europe exchange at 4:37 p.m. in London.

Voluntary Curbs

Companies seeking to voluntarily offset their own emissions will potentially move faster than governments, most of which are going slow on carbon markets, said Louis Redshaw, founder of carbon-market consultants Redshaw Advisors in London.

“It looks like corporates are more likely to create forward demand for international carbon credits than governments,” he said by phone. Neither the EU nor the U.S. have yet indicated they will demand carbon credits as part of the post-2020 climate deal.

India’s emissions are expected to rise at the fastest pace through 2040, according to Bloomberg New Energy Finance. Tata Group is preparing to react to climate pledges being made by countries in which it operates, known as nationally determined contributions under the United Nations climate-protection process, Brooks said last month at the Carbon Expo conference in Cologne, Germany.

“Without a combination of the private sector and carbon pricing, the nationally determined contributions probably won’t be delivered,” Brooks said. “We see investors losing some appetite for carbon-intensive ventures. We see emergence, I use that word liberally, of a global carbon market. We see it coming, but we don’t see it there yet.”

Before it's here, it's on the Bloomberg Terminal.