Achieving a net zero world is a goal we have to meet. Net Zero is critical to our planet’s survival and could not be more urgent but it is also exciting! This huge transformation of the global economy will drive unprecedented levels of innovation and spur the growth of a range of clean industries, old and new. But let’s not pretend it will be easy. Net Zero will require committed cooperation between the private and public sector, non-profits, and individuals if we are to successfully navigate the big barriers, challenges, and negative impacts of the low carbon transition as well as grasp the huge opportunities. As we look forward to COP-26, the big question to both the public and private sector is this - how can we drive the pace and scale of the decarbonisation agenda? How do we inspire greater ambition in this decade? What can we do to push governments, the financial markets, SMEs, and corporations towards a more inclusive and sustainable low-carbon future? How can we all step up?
These are just a few of the guiding questions that I bear in mind as the new Co-Chair of the CPLC’s High-Level Assembly, a responsibility I am deeply honoured to assume alongside the highly respected and long-time climate action advocate Minister Juan Carlos Jobet of Chile.
There is no better time than now to open up a broader discussion on universal carbon pricing and to build climate action momentum ahead of the Glasgow COP26 Summit in November. What the last year has taught us is that we need every tool possible in the climate toolbox – including a carbon pricing mechanism in combination with other global climate schemes – in order to build a sustainable and equitable post-pandemic transition. And with so much attention on the global climate agenda as the new CPLC co-chair, my hope is to engage a wider range of voices and stakeholders in the carbon pricing and climate action discussion. In the past, carbon pricing has sometimes seemed like a highly technical topic that is just for experts and academics, divorced from the other big climate policy debates. It is time to change that and realize that it is absolutely central to every discussion and decision about climate goals. But we need to be pragmatic.
Today’s existing carbon pricing schemes only cover over 20 percent of global greenhouse gas emissions. And carbon prices are far too low in most parts of the world. Only about 20 percent of carbon emitted globally is taxed at all, and most of it is taxed at well below the $75 per tonne level recommended by the International Monetary Fund. Governments need to deploy fair regulations, pricing mechanisms, and emissions trading schemes tailored to support decarbonisation in their unique markets. In certain political climates, mechanisms such as green spending, targeted transfers, or tax cuts could have a huge impact on emissions reduction.
However, meeting nationally determined contributions with a universal carbon price could reduce global mitigation costs by more than 60% compared to countries meeting these targets unilaterally. At the same time, a universal carbon price would stimulate the free flow of low-carbon products and a more rapid transition to low–carbon technologies.
However, when I served as UK Minister of Energy and Climate Change, I encouraged major reductions in greenhouse gas emissions through the deployment of capital through the Green Investment Bank I helped to create, rather than just introducing new taxes to tackle climate change.
I hope this positive agenda chimes with my previous comments, shared in dialogues hosted by the CPLC. Carbon pricing is vital for ensuring externalities are fully reflected in the real cost of goods and services and for spurring investment into the most efficient and innovative climate solutions, especially among low-carbon producers of critical resources such as aluminum.
Equally vital for the international climate agenda is to bring civil society with us on this vital journey and to create a shared sense of mission, rather than relying on top-down measures alone. Fiscal schemes are an essential tool in the climate toolkit, but they must answer to public opinion as well. By introducing carbon pricing as one of the many essential solutions needed to address the threat of climate change, we can illustrate how achieving inclusive economic growth, and climate ambition are not mutually exclusive. But we must never lose sight of the imperative of having an engaging and positive green economic agenda that has equity and fairness at its heart.
Carbon pricing is far more effective if it is supported by other measures which together encourage the private sector to become more sustainable through low-carbon innovation by setting ambitious climate targets and fostering inclusive dialogues with all stakeholders.
The catastrophic COVID pandemic has presented not only a terrible challenge for the economy and society but also a once in a lifetime opportunity to examine, implement or accelerate green issues. Let’s not waste this unexpected global reset, and let’s put carbon pricing at the heart of the discussion.
