The discrepancy of managing decarbonization & profitability

Abstract

When looking at scope of the decarbonization effort, the sector(s) being targeted, the timeline for achieving the goals, and the specific decarbonization technologies and approaches being used there are various factors impacting the cost of decarbonization which in effect might put profitability of traditional business models at risk. In general, when considering the extended scope of decarbonization (aiming not only at production facility but also involving usage of the products) can involve significant upfront costs to transition from fossil fuel-based energy sources to cleaner alternatives such as renewable energy sources or nuclear power. Within this paper the cost of decarbonization relate to the cost of transformation. Even tough the cost of not decarbonizing and dealing with the impacts of climate change are not fully estimable, both in economic and human terms, the investment in the transformation involves significant upfront invest. Looking at similar transformation initiatives this paper will provide a framework on what to consider when transforming and which cost buckets with impact on profitability need to be considered including government subsidies, tax incentives, and carbon pricing policies can help to reduce the cost of decarbonization and provide a level playing field for low-carbon technologies to compete with fossil fuels. CZU: [338.1:504.03]:620.9. JEL: M190. DOI: https://doi.org/10.53486/icspm2023.58