Make Carbon Pricing Cornerstone of Climate Policy – OECD

GLOBE-Net, October 9, 2013 – A transformation of the global energy system is needed if countries hope to limit climate change to a 2ºC temperature increase from pre-industrial levels. 

That was the key message delivered of a Lecture by OECD Secretary-General Angel Gurría  organized jointly with the London School of Economics. It was also the core message of a report – Climate and Carbon: Aligning Prices and Policies – released ay the same time by the OECD.

Gurría called for a coherent approach to carbon pricing to ensure that price signals sent to consumers, producers and investors alike are consistent and facilitate the gradual phase-out of fossil fuel emissions.

[stextbox id=”custom” float=”true” align=”right” bcolor=”77d6f7″ bgcolor=”77d6f7″ image=”null”]”Whatever policy mix we put in place, it has to lead to the complete elimination of emissions to the atmosphere from fossil fuels in the second half of the century”  OECD Secretary-General Angel Gurría [/stextbox]

He also questioned how much impact existing climate policies can have when countries around the world continue to subsidize the exploration, production and use of fossil fuels.

“Whatever policy mix we put in place, it has to lead to the complete elimination of emissions to the atmosphere from fossil fuels in the second half of the century,” Mr Gurría said. “We don’t need to see zero net emissions tomorrow, but we will need to be on the pathway.”

The report says governments need to ensure that carbon pricing is sufficient to achieve climate goals and that other policies are well-aligned with these goals.

With international negotiations getting under way for a new climate agreement in 2015, every government needs to review its policy settings and rigorously assess if their overall impact helps climate action or hinders it.

“Cherry-picking a few easy policy measures is not enough,” Mr Gurría said. “There has to be progress on every front, but notably with respect to carbon pricing, and we don’t have any time to waste. Unlike the financial crisis, we do not have a ‘climate bailout’ option up our sleeves.”  

The OECD report says that extending and improving the use of carbon taxes and emissions trading schemes is a necessary first step.

Governments also need to reform the estimated USD 55-90 billion of support provided each year to fossil fuel exploration, production and consumption in OECD countries and the USD 523 billion in fuel and energy subsidies in developing countries.

[stextbox id=”custom” float=”true” bcolor=”77d6f7″ bgcolor=”77d6f7″ image=”null”]While subsidies for consumers are often put in place for social reasons, they are usually poorly targeted, expensive and ultimately undermine climate policy action as well says the report.[/stextbox]

The OECD identifies key elements for developing credible, stable and sustainable carbon pricing mechanisms that can underpin investments in new technologies, as well as in the infrastructure needed to achieve a zero net emission future.

The international community has agreed to limit the average global temperature increase to no more than 2ºC above pre-industrial levels. To achieve this objective, countries worldwide must take on the responsibility to gradually phase out their emissions of CO₂in the second half of this century.

Key issues to consider include:

• Put an explicit price on carbon.
• Identify other cost-effective policy instruments that put an implicit price on carbon.
• Review the broader fiscal policy to ensure that it is coherent with stated climate goals.
• Ensure that any regressive impacts of carbon pricing measures are alleviated through complementary measures and that a clear communication strategy is developed to explain them.
• Agree on climate pricing and policy measures today but plan for the long-term to achieve stated climate targets. 

Among the measures analyzed are policy instruments that price every tonne of CO2 emitted, and other policies that put an implicit price on emissions and cost-effectively spur innovation.

The resulting policy package should increase incentives for consumers, producers and investors alike into making energy-efficient choices consistent with a zero carbon trajectory.

Read the report:  Climate and carbon: Aligning prices and policies.

Read Mr. Gurría’s speech on  The climate challenge: achieving zero emissions.

‘Pricing Carbon Emissions’ will be a major issue discussed at GLOBE 2014, the next in the celebrated  GLOBE
Series of Conferences and Trade Fairs on the business of the environment taking place in  Vancouver Canada, March 26-28, 2014. Reserve your place now. Check here for more details.