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KBRA ESG KNOWLEDGE HUB

Carbon Pricing and Its Potential Credit Impact

Fossil fuel vs renewable / future clean alternative energy concept : Petroleum pumpjack, crude oil drum barrel and solar panel, green battery with leaf on a simple wood balance scale in equal position
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As atmospheric concentrations of carbon dioxide (CO2) continue to rise, climate change is projected to accelerate, pressuring regulators and government agencies to find cost-effective solutions to reduce emissions. In the U.S., fossil fuel combustion is the largest source of greenhouse gas (GHG) emissions and the primary source of CO2. The transportation sector is the largest emitter of energy-related CO2 emissions in the country, followed by the electric power and industrial sectors. For many economists and policymakers, the best way to shift away from fossil fuels and reduce emissions is to put a price on carbon. In this report, Kroll Bond Rating Agency (KBRA) compares two carbon pricing policy options: a carbon tax and cap-and-trade program, as well as discusses potential credit implications for project finance transportation, electricity generation, and midstream industries.

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