Global carbon prices too low to reduce GHGs

27th September 2016


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  • Mitigation ,
  • Reporting ,
  • Carbon Trading

Author

Richard King

Ninety per cent of carbon emissions are not priced at a level that reflect even a conservative estimate of their climate cost, according to the OECD.

The Paris-based body has published an analysis of how carbon prices are used in 34 OECD member countries, as well as Argentina, Brazil, China, India, Indonesia, Russia and South Africa. Overall, the countries assessed account for 80% of global energy use and CO2 emissions.

The OECD measured the price of CO2 resulting from taxes and emissions trading systems, and effective carbon rates (ECR), which are the sum of specific taxes on energy and carbon, and the price of tradable emissions permits. The average ECR across all countries was €14.4/tonne CO2. Excise taxes accounted for 93% of the ECR, with emissions trading systems and carbon taxes worth 5.6 and1.3% respectively.

The analysis also identified the ‘carbon pricing gap’. This is the extent to which ECRs per unit of emissions fell short of pricing emissions at €30/tonne CO2, which the OECD said was a conservative estimate of the damage to the climate per tonne of emissions.

Across all countries, ECRs were particularly low in sectors outside road transport, with 70% of emissions not priced at all, and only 4% of emissions subject above €30/tonne. These sectors included industrial, electricity, commercial, residential, off-road transport, and agriculture and fisheries. These emit 85% of carbon emissions from energy used in the 41 countries studied.

In road transport, 46% of CO2 emissions in the countries analysed had a rate of more than €30/tonne.

Rates varied across countries, the OECD found. The ten countries with the highest ECR accounted for 5% of the carbon emissions across the 41 countries analysed, whereas the ten countries with the lowest rates accounted for 77%.

In the UK, 17% of carbon emissions from energy use had no price signal attached, while about 54% were priced at or above €5/tonne CO2, and 29% are at or above €30/tonne CO2. This is higher than the average across other countries, where 60% of emissions were not priced at all, 30% were priced higher than €5/tonne CO2 and 10% were priced at more than €30/tonne CO2.

Angel Gurría, secretary general of the OECD, said: ‘Pricing carbon, through taxes or emissions trading systems, is one of the most effective tools for reducing CO2emissions and tackling climate change. Prices can and do trigger reductions of energy use, improvements in energy efficiency and a shift towards cleaner forms of energy. The challenge is in getting the prices right.’

Even moderate collective action to increase carbon prices would make a significant impact in putting countries on a pathway to a low carbon transition, he added.

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