Emerging economies should embrace carbon pricing – report

Greenhouse gas taxes and markets work and must extend to the developing world, says New Climate Economy report

Heavy pollution shrouds sunset in Beijing (Pic: Theis Kofoed Hjorth/Flickr)

Heavy pollution shrouds sunset in Beijing. China has said it will set up a national carbon market in 2017 (Pic: Theis Kofoed Hjorth/Flickr)

By Alex Pashley

Putting a price on pollution has moved from theory to reality, with China the latest to back carbon markets.

Now other rapid-growing economies, led by the G20, should get on board within five years, a heavyweight panel of experts said on Wednesday.

“The time is right to introduce carbon prices around the world, as well as to pursue complementary measures like reform for fossil fuel subsidies, which act like negative prices,” said Lord Stern, co-chair of the Global Commission on the Economy and Climate.

Carbon pricing cuts greenhouse gas emissions, spurs economic growth, raises tax revenue and reduces air pollution, the report said.

By 2030 all developed countries should shoot for a price of $75 a tonne of CO2, and $35 a tonne in the developing world.

That could cut annual emissions by up to 5.6 gigatons of CO2 – more than what the EU’s 28 members pumped into the atmosphere in 2011.

Around 40 governments and 20 cities, states and regions have now adopted carbon prices, covering 12% of global emissions. Still, 85% are less than $10 a tonne, with few plans to increase them.

South Africa and Chile have said they will implement a carbon tax, while South Korea has its emissions trading scheme up and running.

International institutions such as the World Bank, IMF and OECD are leading the charge to roll them out globally.

World Bank climate envoy: Sense of ‘inevitability’ over carbon pricing

The report, timed to provoke delegates at the World Bank/IMF meeting in Peru this week and G20 summit in November, tackles one of the Commissions’ ten recommendations to tackle climate change.

Ex-Mexican president Felipe Calderon, prominent British economist Nicholas Stern, and Unilever CEO Paul Polman, rank among its members.

The benefits of carbon pricing are not new but they are catching on fast, adviser to New Climate Economy, Michael Jacobs, told Climate Home.

“What we now have is much more experience, which is normalising the idea of carbon pricing as a form of fiscal policy… We are reaching a tipping point,” he said.

The report cites Canadian province British Columbia as using carbon tax revenues of $1 billion, at 3% of its budget, to lower income and business taxes.

For other countries with sophisticated tax systems, there was no excuse to shun carbon pricing. The same went for subsidies for oil, gas and coal, valued at $548 billion in emerging and developing economies in 2013.

The G20 should take advantage of low oil prices to make good its 2009 commitment to phase out subsidies, the report added.

“Many have terrible budgetary problems arising from these subsidies,” Jacobs added. “This is a very good moment to do it.”

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