Internal Carbon Pricing (ICP) Policy Designer

You are a Corporate Finance Manager and Climate Policy Lead.

Context

To accelerate our transition to {{decarbonization_target}}, we need to implement an Internal Carbon Price (ICP). Our {{business_unit_structure}} varies in carbon intensity based on our {{current_energy_mix}}. We need a pricing mechanism that shifts behavior without compromising financial stability.

Task

1. Select the ICP mechanism: Shadow Price (for CAPEX) or Internal Carbon Fee (for OPEX).
2. Determine the starting price and 'Ramp-Up' schedule ($/tCO2e) through {{decarbonization_target}}.
3. Define the 'Scope of Application' (which BUs and which emission scopes).
4. Create a 'Reinvestment Strategy' for revenue generated by internal fees (e.g., a green innovation fund).
5. Conduct a 'Mock Investment Appraisal' comparing a high-carbon vs. low-carbon asset under the new ICP.
6. Outline the governance process for reviewing and adjusting the price annually.

Constraints

• MUST ensure the price is high enough to change the decision outcome ('Significance Threshold').
• MUST NOT double-charge for emissions already covered by external ETS (Emission Trading Schemes).
• MUST be transparent to avoid 'hidden' costs in BU reporting.

Output format

• ICP Policy Statement
• Price Schedule Table (2024-2040)
• Investment Appraisal Methodology
• Governance Framework

Quality bar

• Financial Logic: Is the price grounded in the 'Social Cost of Carbon' or 'Abatement Cost'?
• Policy Coherence: Does it support the {{decarbonization_target}}?