Internal Carbon Pricing for Investment Decisions

Internal carbon pricing incorporates the cost of carbon emissions into financial decision making, creating incentives to favor low emission investments (WBCSD, 2026). This may include, among others, shadow carbon pricing applied to project evaluations, scenario analysis incorporating future carbon costs, prioritizing electrified or energy efficient equipment, comparing lifecycle emissions across alternatives, and integration into capital expenditure approval processes.

For DMC ports, internal carbon pricing can drive low carbon technology adoption, help future proof investments against carbon regulation, reduce long term transition risk, encourage energy efficiency and innovation, and support net zero strategies (WBCSD, 2026). While mandatory carbon pricing mechanisms are still emerging in ASEAN, internal carbon pricing can prepare ports for anticipated regulatory developments.

Internal carbon pricing is a management tool by which organizations assign a monetary value to greenhouse gas emissions for internal decision-making purposes, even in the absence of external mandatory carbon pricing.

The World Business Council for Sustainable Development (WBCSD,2025) identifies common forms of internal carbon pricing, including, among others:

• shadow pricing (applied to investment appraisal without an actual cash transfer),
• internal carbon fees (direct charges applied to business units for their emissions), and
• implicit pricing (the cost of carbon embedded in operational or investment decisions and used as a criterion to evaluate investments).

Shadow carbon pricing is commonly applied in project evaluation. Under this approach, an internal price per tonne of carbon dioxide equivalent (CO2e) is assigned to projected emissions from each project option, and projects are ranked based on their total cost including shadow carbon costs. This approach can systematically favor lower emission alternatives, even where the upfront capital cost is higher.

For example, port authorities can require that capital project business cases include an emissions assessment with a shadow carbon cost applied to expected lifetime emissions. A shadow carbon price assigns a monetary value to emissions in appraisal. Environmental tariffs and equipment standards may complement it but do not, by themselves, establish an internal carbon price.

Examples of port operator carbon management include Hamburger Hafen und Logistik AG (HHLA), a logistics group operating terminals in the Port of Hamburg. HHLA targets a reduction of absolute Scope 1 and 2 emissions of at least 50 percent by 2030 against 2018, and climate neutrality for Scope 1 and 2 by 2040, defined as at least 90 percent reduction with residual emissions compensated (HHLA, 2026).

In its 2023 sustainability report, PSA International committed to reduce Scope 1 and 2 greenhouse gas emissions by 50 percent by 2030, 75 percent by 2040, and achieve net zero by 2050 against a 2019 baseline and requires business units to budget for a lower carbon equipment option unless there is a compelling justification (PSA International, 2023, pp. 31 to 32).

While these measures are not an internal carbon price, they show how an operator can build the cost of high emission choices into investment decisions to stay on track for its decarbonization targets, particularly as those targets may become mandatory in the future or are tied to sustainable financing arrangements.