charge our business groups, and invest funds to do social and environmental good.” 126 Microsoft also requires its business practices to have a positive impact on the communities it serves and so adopted an internal carbon fee to help drive responsible business decisions that encompass both: “While the fee makes good business sense, it also makes good people sense.” 127 Funds generated from the fee go beyond reducing Microsoft’s environmental impact to investing in citizenship projects that result in low-carbon fuel supplies, ecosystem protection, and sustainable commu- nities. The fee was also instituted to drive a corporate culture change that raises awareness of the impact of business operations on the environment. The company also recognizes and responds to external stakeholders (investors, non-governmental organizations) looking for companies to demonstrate responsibility by reducing its carbon footprint, and accounting and reporting on those actions in a transparent way. To gain internal buy-in for a carbon fee, the envi- ronmental sustainability group discussed it with the company’s senior management and key business groups, including the finance division. According to Microsoft, the resulting carbon fee provided the financial justifica- tion to prioritize investments in energy efficiency and sustainability projects that could save money, reduce its environmental footprint, and make a positive social impact on communities. It was the strong alignment of the carbon fee with Microsoft’s business strategy that garnered the buy-in from key internal stakeholders and received “the engagement and attention of really smart people in the company that Microsoft would have not got otherwise.” 128 Microsoft’s carbon fee program is evaluated annually to reflect the total investment strategy to maintain and eventually go beyond Microsoft’s carbon neutrality goal. Between 2012 and 2016, the internal carbon fee ranged from $5 – $10 per metric ton. The same price is applied companywide across 12 business units in more than 100 countries. 129 The fee is administered by a cross-depart- mental group of representatives from the corporate finance department and environmental sustainability team. The group establishes the carbon price and identifies potential projects to fund with the revenue generated. The carbon fee is determined in two steps: First, a carbon price is calculated each year by estimating the amount of money Microsoft will need to spend on environmental initiatives (e.g., purchase of green power for its datacenters, cost of electricity consumption by datacenters) to maintain its carbon neutrality goal. That level of investment is divided by the total amount of Microsoft’s projected annual average greenhouse gas emissions. The denominator or projected annual emissions is the projected amount of energy that each business unit (office space, data centers, or business air travel) consumes every quarter. Those kilowatt-hours and gallons of fuel are converted into metric tons of carbon. The resulting formula is: Price on carbon ($/tCO 2 e) = yearly funding required for
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- Emissions trading, Carbon offset