Mastering three key elements to tailor an internal carbon pricing mechanism

Delta's internal carbon pricing report highlights three essential factors: establishing consistent goals and consensus, selecting appropriate application models, and determining effective carbon pricing strategies. The report presents multiple references for determining carbon price, including the social cost of carbon emissions, industry benchmarks, and price estimates from global organizations. This enables companies to customize a pricing approach based on their operational needs.

The report also outlines the key operational elements of Delta’s carbon pricing management mechanism. It begins with the internal alignment on objectives and progressing to cross-departmental collaboration. This multi-faceted carbon fee mechanism involves comprehensive training programs, integration with executive performance evaluations, and the establishment of clear application, review, and utilization. The system is overseen by the Board of Directors to ensure effective implementation.

Through the dedicated efforts of our colleagues, the internal carbon pricing mechanism has not only operated effectively but has also yielded tangible results in carbon reduction. This report summarizes our achievements: In 2023, a total of 410 energy conservation projects were implemented at Delta’s global operations, including equipment upgrades and the adoption of advanced energy-saving technologies. Of these, 377 initiatives were supported by the internal carbon pricing mechanism, resulting in electricity savings exceeding 48 million kilowatt-hours, which is equivalent to a reduction of approximately 36,297 metric tons of carbon dioxide. Furthermore, Delta strategically integrates various types of renewable electricity with its internal carbon fee system, encouraging each site to prioritize the use of self-generated and self-consumed renewable electricity and bundled RECs (renewable energy certificates) (Note 1). Through the collective efforts of colleagues across various regions, the use of renewable electricity in Delta’s global operations reached 76% in 2023. This achievement marks a significant step towards the RE100 goal of attaining 100% renewable energy usage by 2030.

On February 12, Delta held a media sharing session regarding its internal carbon pricing report. During this session, Chief Sustainability Officer Jesse Chou presented the report to the media.

Leveraging internal carbon fee to drive low-carbon innovation and business opportunities

Beyond renewable electricity and resource management, Delta has identified energy technology development and low-carbon innovation initiatives as key applications for its internal carbon fee fund. This approach extends carbon reduction efforts beyond operational energy savings, creating new business opportunities for Delta.

The implementation of the internal carbon pricing mechanism has already yielded notable outcomes. For example, in 2023, Delta’s internal carbon fee supported the development of an AI Cooling Energy Saving System (ACES), which is designed to enhance energy conservation in data centers. This system employs three-dimensional digital twin physical modeling to simulate the thermal and cooling channels of data centers, thereby creating an efficient and precise multi-scenario virtual and physical environment. This innovative approach replaces real-world testing to provide optimal equipment configuration or adjustment recommendations. The ACES system has been successfully deployed at the Delta headquarters data center. The power usage effectiveness (PUE) has improved from an average of 1.32 to a best value of 1.26, achieving an energy savings rate of 9.24%. This improvement is estimated to reduce carbon emissions by approximately 25.1 tons annually.

AI cooling and energy saving system helps Delta's data center to reach 9.24% energy savings.

Additionally, the carbon fee supports Delta’s collaboration with the Massachusetts Institute of Technology (MIT) on the Taiwan Innovative Green Economy Roadmap (TIGER), a two-year research project. This initiative invites MIT to participate in 16 online seminars and 4 in-person workshops, covering topics such as carbon emission surveys and trading strategies, the comprehensive economic and industrial impacts of various decarbonization or carbon sink pathways, as well as research findings related to corporate carbon reduction technologies and business development. This effort assists Delta in understanding and participating in the development of the global energy industry.

This report demonstrates that Delta has effectively achieved its phased carbon reduction targets and accelerated its decarbonization efforts since implementing its internal carbon pricing system. In the future, Delta will enhance its internal carbon pricing mechanism by developing advanced methodologies that expand the scope of carbon fees to include Scope 3 emissions, in addition to the current Scope 1 and Scope 2. At the same time, we hope that this report will influence and assist corporate partners in implementing internal carbon pricing as a carbon management tool. This approach should be integrated with the core development strategies and carbon reduction goals of the enterprise, driving internal behavioral changes to address future climate risks and enhance climate resilience.

Note 1: Bundled RECs refers to the requirement that when a company purchases renewable energy certificates, the electricity must be acquired simultaneously with the certificates; purchasing the certificates independently is not permitted. This indicates that the power plant must supply electricity to enterprises either directly or indirectly. Enterprises need to obtain renewable energy certificates by signing a power purchase agreement (PPA), which is a rigorously defined renewable electricity certificate in accordance with international standards.

The cover of Delta’s internal carbon pricing report.