Greenhouse gas taxes and markets worth US$50 billion, says report, with interest growing ahead of Paris climate pact
Polluter pays: 40 countries and 20 regions put a price on emissions (Pic: Flickr/kris krug)
By Ed King in Barcelona
The World Bank’s top climate change official says there is growing momentum behind moves from countries and businesses to start pricing the costs associated with greenhouse gas emissions.
Around 40 countries and 20 regions mandate a price on carbon dioxide, a report from analysts Ecofys and the World Bank revealed today, in measures worth an estimated $50 billion.
“It’s no longer a matter of if or when to price carbon – there is a growing sense of inevitability to put a price on carbon,” said Rachel Kyte, the Bank’s special envoy on climate.
Interest in rolling out carbon markets, taxes and prices on pollution from specific sectors was increasing ahead of a proposed UN climate pact, due to be signed in Paris this December, she said. “What we are seeing is a groundswell of bottom-up climate action.”
The value of emission trading schemes (ETSs) rose by $2 billion to $34bn in 2015, according to the report, Carbon Pricing Watch 2015.
This was due to the launch of South Korea’s ETS at the start of the year and the expansion of California and Quebec cap-and-trade programmes it said.
Global growth slowed in part due to the decision from Australia’s government to repeal its carbon tax in July 2014.
8 new carbon prices or taxes rolled out since 2014 – inc Mexico, Portugal, France, Chile & Hubei #carbonexpo pic.twitter.com/oYSrkO6HmW
— Edward King (@rtcc_edking) May 26, 2015
The study highlighted the rapid growth in the number of countries and regions adopting a variety of carbon pricing tools, citing new laws in France, Portugal, Chile and Mexico.
China’s plans for a national market in 2016 – which would overtake the European Union as the world’s largest – were also welcomed by the study.
But the level of emissions covered by carbon pricing schemes rose by less than 1%, the study noted, in comparison with 10% growth between 2005-2013, when the EU, Japan, Australia and the first of the Chinese pilot markets opened.
And it offered little solace for the UN’s Clean Development Mechanism – the world’s only truly global market – which has suffered from low demand and a high supply of credits.
Demand for future credits was “expected to be minimal” while “carbon market actors continue to exit the market” it said.
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Prices differ radically across the world. In Sweden a tonne of CO2 can cost as much as $130, falling to $62 in Switzerland, $9 in Korea, $7 in Shenzhen and $3 in Mexico. The UK has a carbon price “floor” of $27.
Many companies are also internally pricing their emissions, partly in response to fears from some investors that climate change could hit their financial gains, said the report.
Microsoft and Google price a tonne between $0-20, BP and Shell $20-40 while Exxon Mobil operates in a range of $40-60.
A survey commissioned by the International Emissions Trading Association of its members found 58% expect carbon pricing to expand following a Paris climate agreement.
A majority of the 122 respondents expected China to have a national carbon market running by 2020, prices to pick up in the EU ETS and Ontario to join California and Quebec’s pricing system.
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“The survey shows fresh wind blowing in the sails of carbon markets,” said IETA chief Dirk Forrister.
“Recent years have seen a burst of activity in new market development, which is reflected in the survey. The message for Paris is that markets matter – and the challenge for policymakers is to bring together all these bottom-up efforts and find a way to make the links between domestic actions and international contributions.”
PwC’s Jonathan Grant, who collated the results, agreed: “This year, there has been a real uptick in enthusiasm and momentum around carbon pricing and carbon markets in the EU, North America, China and elsewhere.”
It is one of a few areas of “genuine business consensus,” Grant added, and “the right approach for society to tackle growing emissions across the world”.
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Still, the World Bank study cautioned against investing too much optimism in the role of markets to address climate change – which scientists say could cause catastrophic droughts, floods and rising sea levels.
Markets needed to be seen as just one of many tools, it said, along with slashing subsidies for fossil fuels and boosting investments in clean energy projects.
“Carbon pricing instruments will need to operate in tandem to address the urgency and scale of the climate change mitigation challenge.”