Companies Face $1.4 Trillion Carbon Price Exposure Over Next Decade, BNEF Says

The minute

Global companies could face $1.4 trillion in carbon price “exposure” over the next decade, according to new analysis from BloombergNEF (BNEF). Under bullish scenarios, that figure could surpass $1.7 trillion.

The estimate reflects the growing financial impact of carbon pricing mechanisms as carbon markets mature worldwide. This year alone, the cost of allowances needed to cover carbon compliance is expected to reach almost $96 billion. By 2035, BNEF has predicted that exposure will rise to $187.8 billion annually.

The analysis, which examined the assets of 3,100 companies, signals that carbon costs are becoming a material financial risk for companies across sectors.

Why it matters

Carbon pricing has shifted from a policy discussion to a balance-sheet reality. As more jurisdictions implement or tighten emissions trading systems and carbon taxes, companies that have not accounted for these costs risk significant financial exposure in the coming years.

The BNEF analysis underscores the urgency for corporate decarbonization strategies. Companies that reduce emissions faster may avoid a growing share of that $1.4 trillion bill, while laggards could see carbon costs erode margins and competitiveness.

Who is most exposed

The most exposed companies, according to BNEF, are energy firms. Pacific Gas and Electric Company (PG&E) and RWE face projected costs of $58.9 billion and $54.3 billion, respectively, over the next decade. Steel and mining giant ArcelorMittal alone will face $5.7 billion in annual carbon compliance costs by 2035.

Overall, the utilities industry makes up a third of the projected exposure, equal to $488.2 billion. Materials companies will see their share increase from 10.7% today to 26.7% by 2035, as free allocations are phased out and businesses become exposed to rising prices.

Around 84% of companies have revenue risk and carbon exposure pulling in different directions, according to BNEF. For instance, the profit risk to airlines continues to outweigh their carbon exposure, meaning they are unlikely to decarbonize under current conditions.

The EU ETS and its overhaul

Over 81.4% of the 7,400 assets measured by BNEF draw their exposure from the European Union’s Emissions Trading Scheme (EU ETS). Between 2021 and 2023, the EU’s ETS helped reduce industrial emissions by 41%, equivalent to around 800 million tonnes of carbon dioxide per year.

Last month, the European Commission proposed a major overhaul of the ETS, slowing the pace of emissions reductions after 2030, extending free carbon allowances for some energy-intensive industries until 2038, and expanding the scheme to cover aviation, maritime transport, and municipal waste incineration. The overhaul introduces uncertainty for companies trying to model future compliance costs, since the pace of free allocation phase-outs directly determines how much of the carbon price lands on corporate balance sheets.

Product-level carbon accounting

In related news, the International Chamber of Commerce (ICC) and Carbon Measures have produced a review of the current carbon accounting landscape, with a view to helping create a ledger-based accounting framework for product-level data. Enabling emissions data at the individual product level should ensure that all carbon is accurately accounted for and emissions are not double-counted. It would also help buyers, investors, and customs authorities improve emissions-based decision-making.

The EU’s Carbon Border Adjustment Mechanism (CBAM) is a signal that product-level carbon is becoming a priced, compliance-grade quantity across iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen, with other sectors set to join in the future. Other product-level regimes include California’s Low Carbon Fuel Standard (LCFS) and China’s Carbon Footprint Management System (CFMS).

The ICC report emphasized that no single universal accounting architecture currently exists to record each emission once, carry it through the value chain by legal transfer, allocate it to products by causal logic, and stand up to assurance at the level financial accounts are held to. Without that architecture, companies operating across multiple jurisdictions face overlapping and sometimes contradictory reporting demands.

Brazil’s carbon market

Brazil enacted its regulated carbon market in late 2024, creating the Brazilian Emissions Trading System (SBCE, in Portuguese). The system, overseen by the Ministry of the Environment and Climate Change, will initially cover facilities that emit above a defined annual threshold of greenhouse gases. Operators above the threshold will be required to monitor, report, and verify their emissions, then surrender allowances or offsets to cover them.

The implementing regulations are still being drafted, and the exact compliance timeline, allocation methodology, and penalty structure remain open questions. For companies operating in Brazil, the practical implication is that carbon costs, previously limited to voluntary commitments, will become mandatory for covered sectors. Companies that have not yet built internal emissions monitoring and reporting systems will need to do so before the compliance cycle begins.

The common mistake

The most frequent error companies make when dealing with carbon pricing exposure is treating it as a static, one-time cost estimate. Carbon prices fluctuate based on policy changes, market dynamics, and the pace of allowance phase-outs. A compliance cost projection made in 2026 can look very different by 2030 if a jurisdiction accelerates its reduction targets or, as in the EU’s recent proposal, slows them down. Companies that build their financial planning around a single carbon price scenario, rather than stress-testing across a range of prices and regulatory timelines, routinely underestimate or misallocate their exposure.

What remains unresolved

Several structural questions will determine how the $1.4 trillion exposure ultimately distributes. First, the speed at which free allowances are phased out in the EU and other systems directly controls when costs become real. The European Commission’s proposed extension to 2038 delays that reckoning for some industries but does not eliminate it. Second, the fragmentation of carbon markets globally means companies operating across borders face different prices, rules, and timelines with no harmonized mechanism to reconcile them. The ICC’s call for a universal accounting architecture addresses this gap in theory, but adoption is not guaranteed. Third, the interaction between carbon border mechanisms (like CBAM) and domestic carbon markets in exporting countries remains a source of dispute in trade negotiations. How these questions are resolved will shape whether carbon pricing achieves its stated goal of driving decarbonization or simply redistributes costs unevenly across geographies and sectors.

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