At this year's climate ministerial of the World Bank Group/IMF Spring Meetings, 42 finance and development ministers discussed phasing out fossil fuel subsidies, putting a price on carbon and mobilizing the trillions of dollars in finance needed for a smooth, orderly transition to a low-carbon economy. World Bank Group Vice President and Special Envoy for Climate Change Rachel Kyte describes the conversations in the room and the key takeaways.
Philippe Desfossés is the CEO of ERAFP, the French Public Service Additional Pension Scheme. He spoke about carbon pricing from an investor's perspective.
“I support putting a price on carbon because it fixes a market failure. Without carbon pricing, the market has no way to address the costs associated carbon emissions. These costs end up being borne by everyone, including companies and societies.
A dangerously warming planet is not just an environmental challenge – it is a fundamental threat to efforts to end poverty, and it threatens to put prosperity out of the reach of millions of people. Read the recent Fifth Assessment Report from the Intergovernmental Panel on Climate Change if you need further evidence.
If we agree it is an economic problem, what do we do about it? There is general agreement among economists that a robust price on carbon is a key part of effective strategies to avert dangerous climate change. A strong price signal directs finance away from fossil fuels and toward a suite of cleaner, more efficient alternatives.
This logic is not lost on governments and companies. Momentum is building around the globe to put a price on carbon. Consider these facts:
Buried under the most snow since records have been kept, as we are right now in Washington, the mind turns naturally to the effects of extreme weather events. Clearly the impacts for those of us with solid housing and uninterrupted WiFi access are minimal compared with the impacts of extreme weather for most people in the world. But even here we can see a combination of effects -- the costs of closing offices or of running through the whole winter's supply of firewood in one week, at the same time as the economic uptick for those who repair household boilers, restore downed power lines or dig people's cars out of the snow or shovel their sidewalks for a fee. Since climate change is expected to increase the frequency and severity of extreme weather events, figuring out the net cost of natural disasters is an important topic. And figuring out sensible ways to reduce those costs is also going to be increasingly important.
At the World Bank last week, we had an interesting seminar from Stéphane Hallegate from the French International Centre for Research on Environment and Development and the National Meteorology School that shed light on some of these issues. Stéphane has modelled the impacts of a number of natural disasters looking at both the direct costs of the disaster (how much does it cost to rebuild structures that were destroyed?) and the indirect costs (what is the cost of a business being closed for several months net of any local economic benefits that may occur as reconstruction starts).