World leaders join call for carbon pricing

20th October 2015

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  • Mitigation ,
  • Carbon Trading ,
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Serena O'Sullivan

Heads of state, city leaders and businesses have joined a high-level panel to spur action on climate change.

Members of the Carbon Pricing Panel, which has been set up by the World Bank and International Monetary Fund (IMF), include German chancellor Angela Merkel, Chilean president Michelle Bachelet, French president François Hollande, governor Jerry Brown of California, and mayor Eduardo Paes of Rio de Janeiro.

The panel is supported by businesses including US institutional investor CalPERS, ENGIE of France, the Mahindra Group of India, and Netherlands-based Royal DSM. They will help link business needs with public policies through the Carbon Pricing Leadership Coalition, which is being launched at the start of the UN talks in Paris next month.

The participation of so many world leaders marks a turning point in the debate on the economic systems needed for low carbon growth, according to Jim Yong Kim, president of the World Bank Group. "There has never been a global movement to put a price on carbon at this level and with this degree of unison," he said.

Christine Lagarde, managing director of the IMF, said: "Finance ministers need to think about reforms to fiscal systems in order to raise more revenue from taxes on carbon-intensive fuels and less revenue from other taxes that are detrimental to economic performance, such on labour and capital."

She advised politicians to evaluate carbon tax rates that would help their countries meet their carbon reduction pledges alongside measures to help low income households vulnerable to higher energy prices.

A global deal on climate is not expected to formally establish carbon pricing, but supporters of such mechanisms are hoping that COP21 talks in Paris will set the framework for future action. OECD secretary general Angel Gurría said: "This panel will help to provide the high level leadership that we need to generate greater momentum on carbon pricing up to and beyond COP21."

The OECD will work with the panel to expand the reach and uptake of carbon pricing, he added.

A growing number of high-profile people and organisations have been calling for carbon pricing. A report published last week by the New Climate Economy, headed by climate economy expert Lord Nicholas Stern, highlighted examples of carbon pricing that have raised revenue without harming the economy.

In June, energy companies BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total wrote to UNFCCC executive secretary Christiana Figueres in support of carbon pricing. The firms highlighted how their operations are already exposed to a carbon price through participation in existing carbon markets and how they adopt a shadow price of carbon when taking investment decisions.

However, the six companies as well as Pemex, Reliance Industries, Repsol, Saudi Aramco stopped short of supporting carbon pricing in a joint declaration on climate change by the Oil and Gas Climate Initiative last week.

Meanwhile, the number of companies using carbon pricing to influence internal decisions has tripled in the past year from 150 to 438, according to the CDP, formerly the Carbon Disclosure Project.

Damien Morris, head of policy at emissions trading campaigners Sandbag, welcomed the new carbon pricing coalition, but warned that the design of any such scheme needs to be carefully thought through.

"After a decade, the EU emissions trading system has failed to drive the emissions cuts needed and flounders at €8 per tonne of CO2. As new schemes expand, importantly in China, designers must ensure the carbon price is both high and reliable enough to drive low-carbon investment at scale," he said.


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