A group of world-leading climate experts has said current carbon pricing is too low and would not allow for a just transition to net zero.
Increasing the current price of carbon dioxide emissions was one of seven demands the Climate Crisis Advisory Group (CCAG) put to global leaders.
In its report What role can carbon pricing play in a just transition to net zero?, CCAG cited data showing 22% of greenhouse gas emissions are currently covered by carbon pricing mechanisms and less than 4% of global emissions are covered by a carbon price above $40 per tonne. That price, however, needs to be at least $40-$80 today and $100-$200 per tonne in 2030 in order to meet the Paris Agreement, according to the CCAG.
The group argues a “properly functioning carbon price” would generate revenues that could help address challenges around the distributional impacts of the green transition.
Tools for policymakers
The CCAG also stated more sectors should be covered by carbon pricing in order “for businesses to consider deep mitigation actions.” At the moment trading schemes tend to be limited to power generation and large scale industry.
A bigger geographical area must be covered by carbon pricing in order to avoid issues with carbon border adjustment mechanisms and provide more consistency for investments, the experts stated. They also said greenhouse gases other than CO2 should be included.
Revenues from carbon pricing must be equitably redistributed, the CCAG said, acknowledging the impact could fall unfairly on vulnerable and low-income households.
The CCAG also noted strong national fiscal and regulatory policies would only be possible in low-income countries if more finance is made available from high-income countries.
Finally, global leaders were told governments must embrace institutional changes in policy making: “…this requires rethinking economic modelling and cost-benefit policy analysis efforts which tend to overestimate the costs and underestimate (and sometimes ignore) the many benefits of rapid decarbonisation policies.”
Carbon pricing at COP26
World leaders will have the opportunity to agree global rules on the operation of carbon markets when they meet at COP26 in Glasgow in November.
Sir David King, CCAG chair, had a strong message for the leaders who will be attending: “Carbon pricing schemes have had a positive and significant impact on emissions reductions so far, particularly when it comes to transitioning away from the use of coal and oil, as well as in some areas on clean energy innovation.
“A properly functioning carbon price covering a large number of countries would send clear signals across global supply chains and help address the distributional impacts of the energy transition. Without significant international fiscal policy revisions such as this, we will categorically lose our fight against climate change, where climate-related disasters become our only certainty.”