European Bank for Reconstruction and Development

Shadow carbon pricing

This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.

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Paris alignmentReasoning
Paris alignedPrices align with the High-Level Commission on Carbon Prices (HLCCP) and are applied to all projects above the emission threshold.

The European Bank for Reconstruction and Development (EBRD) does apply a shadow carbon price. The table below provides a summary of how it is applied across bank operations.

Which projects subject to greenhouse gas (GHG) assessmentProjects which increase net emissions by 25kCO2e 
 
OR
 
Gross emissions over 100ktCO2e.
Which projects apply shadow carbon pricingAll projects.
Price levelWill use the high and low values from the range of prices recommended by High Level Commission on Carbon Prices
How shadow carbon price is usedShadow Carbon Price ‘will be an important input to decision making’.

Uses levelised cost of energy (LCOE) in assessing projects, suggesting the carbon price is likely incorporated into a project baseline.
 
The Bank’s methodology for the assessment of projects with high greenhouse gas emissions applies a shadow carbon price to the gross emissions linked to the project and also compares its social value against a range of low carbon alternatives.
What is it compared to?Identify all other realistically available options to meet the same energy needs as the proposed project. Slightly unclear what this means for projects outside the energy sector.
Are scope 3 emissions included?Scope 3 greenhouse gas emissions may be taken into consideration where relevant (e.g. energy pipelines).

The graph  below shows how the level of carbon pricing at the bank compares with those of the High-Level Commission on Carbon Prices (HLCCP). The HLCCP prices only extend to 2030.

Source: European Bank for Reconstruction and Development (2019) Methodology for the economic assessment of EBRD projects with high greenhouse gas emissions

Recommendation: The EBRD should apply a carbon price scenario to assess alignment with limiting warming to below 1.5°C, alongside the other MDBs.

Last Update: November 2020

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