Climate discussions like those we’ve just been seeing at the UN summit in Katowice, Poland tend to focus on working together to deliver existing climate commitments and raising ambition—getting countries to reduce more GHG emissions, faster. But there’s an equally important issue that gets far less attention: ensuring climate action is delivered in a way that doesn’t leave anyone behind, particularly the world’s most vulnerable people.
See Helen Mountford and Molly McGregors’ latest blog post on how carbon pricing can benefit the poor and reduce emissions.
The Arab Gulf States – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE –are highly vulnerable to oil price shocks due to their high economic reliance on oil and gas export revenues. Historically, oil price shocks have been a source of pressure on the Arab Gulf States economies. However, only since mid-2014 have oil prices seemed to pressure on political regimes to consider domestic economic reforms and development of alternative sources of income (i.e. economic diversification).
To avoid long-term negative implications – such as increasing total CO2 emissions and deterioration of air quality associated with increasing downstream petrochemical energy intensive industries, fossil fuel subsidy reforms, enhancing energy efficiency and the use of clean energy technologies are indeed instrumental to tackle such issues. In this article, carbon pricing is proposed as a useful instrument to complement the aforementioned tools.
To address the global development risks posed by climate change, a major technological shift leading to a substantial reduction in the global greenhouse gas (GHG) emissions will be necessary. In parallel, the substantial global economic and development distortions - that lead to inequality - do not enable the technological and financial transfers needed for a sustainable and equitable global economy. This brings us to a fundamental question: when climate change only imposes an additional threat of unseen scale, how can we change the economic status-quo?
Statoil has been operating in a market where an external carbon price has existed since the early 1990s. Due to CO2 tax and other regulatory measures the oil and gas industry in Norway has adopted emission-reduction measures corresponding to more than five million tonnes of CO2 per annum since 1996. Consequently, Norwegian oil and gas production is in the global premier division for low GHG emissions and the average amount emitted per unit produced is about half the world average.
Last month, at the fourth annual Climate Business Forum, hosted in New Delhi by the International Finance Corporation (IFC), part of the World Bank Group, there was a buzz in the air about business opportunities in clean solutions, as Indian government ministers, leading companies and investors presented their plans to scale up solar, green buildings and distributed energy storage using disruptive business models and innovative financing.
On November 7, 2017, the Carbon Pricing Leadership Coalition (CPLC) launched an Executive Briefing on internal carbon pricing for ship-financing banks at Citibank’s offices in London. This knowledge product was developed with kind support from Carbon War Room. It is meant to generate discussion at the highest levels of ship finance around how to start preparing for upcoming GHG emissions regulations. Hosted by Michael Parker, Head of Shipping at Citibank and Member of the Board of Directors of the Global Maritime Forum, the launch event gathered about 20-30 directors from leading ship-financing financial institutions.
Carbon pricing – in the form of a carbon tax or an emissions trading system – has become a tool increasingly used by governments to address climate change. There’s also growing momentum in the private sector. The latest C2ES report, “The Business of Pricing Carbon,” finds that companies across sectors and geographies are increasingly adopting internal carbon pricing as one tool to prepare for the business-related physical and transition risks of climate change and take advantage of the opportunities in a low-carbon future. As an indicator of this trend rising on the corporate agenda, as of 2017, almost 1,400 companies disclosed to the CDP that they are currently using an internal carbon price or plan to do so in the following two years.
The momentum for climate action is strengthening across the financial sector, with pension funds, banks and asset managers embedding climate change impacts into mainstream finance activities. On the one hand, the financial industry is reacting to carbon pricing regulations, which exposes investments in fossil-fuel companies and other carbon-intensive industries to previously unforeseen costs. On the other hand, the recognition that physical climate change impacts are becoming a systemic risk across the broader economy makes powerful stakeholder groups, risk departments and valuation teams more attentive to the link between a changing climate and asset value. Finally, the need to disclose climate change-related risks by corporates is also being advocated or required by regulators, encouraged by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. Given the Turkish government’s considerations of introducing national carbon pricing legislation at some point, the case for pricing exposure to carbon for an institution like Garanti Bank is apparent.
