The FINANCIAL — For the first time, an unprecedented alliance of Heads of State, city and state leaders, with the support of heads of leading companies, have joined forces to urge countries and companies around the globe to put a price on carbon.
The call to price carbon comes from the Carbon Pricing Panel – a group convened by World Bank Group President Jim Yong Kim and IMF Managing Director Christine Lagarde – to spur further, faster action ahead of the Paris climate talks. They are joined in this effort by OECD Secretary General Angel Gurria.
The panel includes German Chancellor Angela Merkel, Chilean President Michelle Bachelet, French President François Hollande, Ethiopian Prime Minister Hailemariam Desalegn, Philippines President Benigno Aquino III, Mexican President Enrique Peña Nieto, Governor Jerry Brown of California, and Mayor Eduardo Paes of Rio de Janeiro.
These global leaders are calling on their peers to join them in pricing carbon to steer the global economy towards a low carbon, productive, competitive future without the dangerous levels of carbon pollution driving warming. Through strong public policy they are providing certainty and predictability to the private sector so they can make long-term investments in climate smart development, according to the World Bank.
Private sector support comes from US Institutional Investor CalPERS, ENGIE of France, Mahindra Group of India, and Netherlands-based Royal DSM, who will help link business needs with public policies through the Carbon Pricing Leadership Coalition, an action based platform that will be officially launched in Paris on November 30, 2015.
“There has never been a global movement to put a price on carbon at this level and with this degree of unison. It marks a turning point from the debate on the economic systems needed for low carbon growth to the implementation of policies and pricing mechanisms to deliver jobs, clean growth and prosperity,” World Bank Group President Jim Yong Kim said. “The science is clear, the economics compelling and we now see political leadership emerging to take green investment to scale at a speed commensurate with the climate challenge.”
“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 as taxes on labor and capital. They need to evaluate the carbon tax rates that will help them meet their mitigation pledges for Paris and accompanying measures to help low-income households vulnerable to higher energy prices,” said Christine Lagarde, Managing Director of the International Monetary Fund.
Around the world, about 40 nations and 23 cities, states and regions have implemented or are putting a price on carbon with programs and mechanisms covering about 12 percent of global greenhouse gas emissions. The number of implemented or scheduled carbon pricing instruments has nearly doubled since 2012, reaching an aggregate market value of about $50 billion.
This collective experience is providing us with the tools to take the vital step towards pricing carbon and is captured in FASTER principles developed by the World Bank Group and OECD, with input from the IMF. These principles are based on fairness; alignment of policies and objectives; stability and predictability; transparency; efficiency and cost-effectiveness; and reliability and environmental integrity
“Low carbon technologies are an element in the fight against worldwide climate change. With a price for carbon and a global carbon market, we promote investment in these climate friendly technologies. Many governments are already putting a price on carbon as part of their climate protection strategies. We should advance our effort along this path further so that we can actually reach our goal of maintaining the two degree upper limit,” said German Chancellor Angela Merkel.
“In Chile we believe in the polluter pays principle. We have enacted environmental taxes on our transportation and power sector. Both taxes will be instrumental in cleaner power, and more efficient cars, which will make our air cleaner, and our climate safer. And the revenue goes to fund our educational reform,” said Chilean President Michelle Bachelet.
“If we really want to send market signals to enable enterprises to make their decisions under optimal economic conditions, which may be optimal ecological conditions, then the issue of carbon prices inevitably arises as it is the most tangible signal that can be sent to all economic actors,” said French President François Hollande. “I am aware of the fears created by this notion of carbon pricing, particularly among the most carbon- intensive industries, which have concerns, and rightly so, over their competitiveness. We must therefore act with resolve. Countries, big countries such as China, are already setting carbon prices. Europe already has a carbon market.”
“Like many nations, Ethiopia has much to gain from early action on climate change – and much to lose if we collectively fail to act. We are rapidly developing a diverse portfolio of renewable energy resources, have been generating results from large scale programs to rehabilitate landscapes for increased agricultural productivity, resilience and carbon storage, and have shown the world that carbon funds can be put to productive use cutting emissions by regenerating forest cover, and improving people’s lives and livelihoods. A carbon price can be a win-win, not just for nations like Ethiopia, but for the entire planet, provided that it is coordinated and its incidence does not unduly fall on the poor,” said Ethiopian Prime Minister Hailemariam Desalegn.
“Climate change is real. It threatens food and water security, and contributes to the occurrence of more frequent and more destructive storms. In our part of the world, whole South East Asian coastal communities are at a particular risk. They need to be relocated, given the threats of storm surges, rising sea levels, and even landslides. In our own country, we are indeed hard pressed to build back better our vulnerable communities, to support their way of life, and to provide safer, more sustainable livelihood. We are deeply sympathetic about the plight of island nations, particularly Kiribati and Tuvalu, which are likewise in danger due to worsening environmental conditions. Years of international research show that global greenhouse gas emissions are intensifying, consequently contributing to the factors that leave so many at risk. In this vein, developing a price on carbon sets in motion the shift towards cleaner investments for our peoples. The Philippines thus believes that this is a step we must all take part in, lest we collectively suffer the consequences of inaction,” said Philippines President Benigno S. AQUINO III
“The challenge of climate change compels us to rethink and transform the way we produce and consume. The international community must advance towards a low-carbon economy, by setting a price on carbon. In keeping with this goal, Mexico has strengthened its national policy towards green growth. Among other measures, we have established a fossil fuel tax which will foster clean technologies. This way we support international efforts in order to ensure that binding agreements –for both developed and developing countries– will be concluded at the upcoming COP 21, scheduled to be held in Paris,” said Mexican President Enrique Peña Nieto.
“We can’t stand idly by as billions of tons of carbon pollution spew into the atmosphere,” said California Governor Edmund G. Brown Jr. “California has put a price on carbon, but these efforts mean little unless the world’s government and business leaders join us – and go even further.”
“Rio de Janeiro, like most of Brazil, is already experiencing the impacts of climate change – and we’re already taking action,” said Rio de Janeiro, Brasil Mayor Eduardo Paes. “We’re investing heavily in climate-resilient infrastructure, and we’re also committed to slashing carbon emissions across our economy. Putting a price on carbon will serve to accelerate our efforts to build low-carbon urban prosperity – not just in Rio, but in fast-growing cities around the world.”
“Putting a price on carbon is key for ensuring we have credible, cost-effective action on climate mitigation that will get the world on the road to a zero net emissions future,” said Angel Gurría, Secretary-General of the OECD.” While COP21 will be important to set the overall framework for the path forward, it is domestic policies such as carbon pricing that will guide us collectively to that future. 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 is pleased to be engaged in the Panel and to work with the leaders and partner international organisations to expand the reach and uptake of carbon pricing. With so much positive upside to action, why would we not embrace the transition?
“CalPERS supports a price on carbon because we are a financial institution grounded in economics and focused on the long-term. The market needs a transparent and consistent price that discourages carbon emissions, and stimulates low carbon investment opportunities. The goal is that pricing will catalyze a transition to a lower carbon economy,” said Anne Stausboll, CEO of CalPERS.
“Energy use is the main source of greenhouse gas emissions. Energy transition, key to keeping to a 2°C rise in temperature on the planet, has started, and ENGIE wants to lead. In addition to the 2 main pillars of its transition strategy – scaling up renewable and energy efficiency solutions and services Worldwide -, ENGIE has decided to stop developing any new coal generation project (that has not already been legally engaged). ENGIE has put a price on carbon to drive its investment decisions: generalizing carbon pricing is crucial to drive and boost low carbon energy transition everywhere and preserve the planet,” said Gérard Mestrallet, CEO of ENGIE.
“Growth and Sustainability are complementary and not conflicting goals, both are necessary to achieve a reasonable quality of life for all. Emerging countries will need to leverage technology to follow a low carbon growth path while developed nations will need to reduce their carbon footprint,” said Anand Mahindra, Chairman and Managing Director of Mahindra Group of India.
“We need to prevent a global temperature rise above 2 degrees Celsius. A meaningful carbon price will provide an economic incentive to shift from fossil to (bio-) renewable energy and reduce GHG emissions. DSM enables a low carbon economy by, for example, increasing solar panel yields and converting crop residue into advanced biofuels. To help us take the right decisions from both an economic and environmental perspective, we use an internal carbon price of €50. Business has a responsibility to take care of the world for next generations,” said Feike Sijbesma, Chairman and CEO of Royal DSM.