WESFARMERS SUSTAINABILITY REPORT 2018

Shadow carbon price

Wesfarmers has put a shadow price on carbon to help ensure investment decisions reflect all costs (including environmental costs) and reduce our carbon footprint cost-effectively. Shadow carbon pricing is a method of investment decision analysis that adds a hypothetical surcharge to market prices for goods that involve significant carbon emissions. For example, if Wesfarmers is analysing an acquisition of new energy-using equipment, it would use expected energy costs of expected market prices plus a charge associated with the carbon dioxide that would be emitted when the fuel is combusted.

Wesfarmers applies the shadow carbon price in the analysis of investments and other strategic decisions to give an edge to options that are more emissions efficient, other things being equal.

Wesfarmers' shadow carbon price for capital expenditure decisions in Australia: 

Years 0-3 4-7 8-10 11-15 >15
$/tonne CO2e 6 18 26 42 53

This is based on a moderated view of necessary and likely carbon prices in Australia and overseas. There is a view that a formal tradeable price on carbon will be re-introduced in Australia at some time in the medium-term. The underlying data behind the carbon price is reviewed annually.