This weekend, the leaders of the G7 committed to a series of actions that mark their first serious recognition of the economic transformation that is ahead of us.
Collectively, they recognized the need to decarbonize the global economy, enshrining in economic cooperation what the scientists in the IPCC told us last year in their Fifth Assessment Report. They called for ambition at the Paris climate talks this year – not new, but they recognized that they, individually and collectively, need to be in the upper part of the ambition bracket and that that means at least a “transformation of the energy sector by 2050.”
They talked about the mobilization of capital for this transformation, as well as ending the increasingly profligate use of harmful fossil fuel subsidies. Recognizing the need for an orderly transition to low-carbon growth as quickly and as smoothly as possible, they took on some degree of leadership around the pledge to provide $100 billion in climate finance for developing countries from public and private sources before 2020. More on that in a moment.
Eldar Sætre is president and CEO of Statoil. He was one of six oil and gas company CEOs who issued a joint call to governments around the world on June 1 to put a price on carbon.
"Statoil has for some years called for a price on carbon because we know that carbon pricing actually works. If more governments put a price on carbon, other businesses will follow suit and quickly.
Over the past two weeks, hundreds of global business and government leaders meeting in Paris and Barcelona demonstrated the growing support for ambitious climate policies.
At the Business & Climate Summit in Paris, François Hollande, the president of France, echoed a key message from the private sector in his keynote address, saying, “Carbon pricing is essential to move to a low-carbon economy.” Business leaders repeatedly asked governments to put a price on carbon to enable them to scale up investment in low-carbon solutions. Eldar Saetre, chief executive of Norway’s Statoil described a carbon price as “the single most efficient measure.”
The messages carried into Barcelona and Carbon Expo the following week, as market traders and officials from from multinational companies and governments discussed carbon pricing tools and options to finance a transition to sustainable economic growth. The Expo saw a 30 percent uptick in attendance this year, due in part to the growing interest in carbon pricing and the upcoming climate negotiations. The World Bank Group released its Carbon Pricing Watch, reporting that about 40 national and over 20 sub-national jurisdictions, representing almost a quarter of global greenhouse gas emissions, are now putting a price on carbon. Carbon pricing instruments have increased their coverage threefold in the past decade and now represent 7 gigatons of CO2.
A learning journey
With the growth of carbon pricing instruments and rising interest from the private sector, governments are increasingly learning from one another and experimenting with different carbon pricing solutions. Whether they use taxes or emissions trading systems, there is now an emerging evidence base of how to successfully price carbon. Three jurisdictions are leading the way: the European Union, California and China.
Peter Damgaard Jensen is the CEO of Pensionskassernes Administration A/S, a Danish investment manager with a portfolio that includes pension funds. He spoke at the World Bank Group about carbon pricing and engaging with fossil fuel companies to reduce climate risks.
"We are supporting the price on carbon because we think it is the most cost effective way of having influence on the way companies use carbon and have carbon emissions.
In PK (Pensionskassernes Administration A/S), we have just started a policy especially targeting companies that are very dependent on coal. We do that because we think coal is the first fossil, not fuel, but fossil product that will get out of the market because it is the product with the highest CO2 emissions.
In preparing for a climate agreement in Paris, countries all over the world are planning their domestic strategies for cutting emissions. This often requires new policies to create incentives for low-carbon development, and for that, governments need accurate and comprehensive emissions data.
One important building block is a greenhouse gas reporting program, which a growing number of countries are working on. Mexico, for example, is gathering information from its newly established emissions reporting program to support its mitigation policies. The European Union’s and California’s reporting programs are essential to their emissions trading systems, and China’s reporting program will underpin its national trading system, planned for launch in late 2016.
At Carbon Expo today in Barcelona, the World Bank Group’s Partnership for Market Readiness with the World Resources Institute released the Guide for Designing Mandatory GHG Reporting Programs. Drawing on 13 existing and proposed greenhouse gas emissions reporting programs, the report looks at successful ways to build a strong data collection system and showcases best practices. It provides step-by-step guidance on developing and implementing these reporting programs.
Carbon pricing was the center of discussion as Carbon Expo got underway in Barcelona on May 26. World Bank Group Vice President and Special Envoy for Climate Change Rachel Kyte was asked by RTCC about the changing views toward carbon pricing as a policy tool in the fight against climate change and how business leaders responded to carbon pricing during Climate Week Paris the previous week.
By Magdalena Andersson, Minister for Finance, Sweden
and Isabella Lövin, Minister for International Development Cooperation, Sweden
Sweden is proud to join forces with Sustainable Energy for All (SE4All), convening in New York this week. Energy is one of the most decisive issues of our age. Without secure access to energy, we won’t achieve real and lasting poverty reduction. Without the expansion of clean energy, we won’t be able to stop climate change.
With business as usual and no significant carbon emission cuts, we have only 15 years left before we have emitted enough CO2 to make this planet more than 2 degrees warmer. Then we will see a dramatic increase in droughts, floods, storms and species extinction – and we will have changed the conditions for every generation to come. And we know that it is the poorest who will be hit the hardest by the effects of climate change.
This is not a political statement but a scientific one. Fifteen years left.
So we must start changing our energy systems, going from fossil to renewable, now.
Gérard Mestrallet is chairman and CEO of ENGIE, formerly GDF Suez. He spoke at the World Bank Group about his company's support for carbon pricing and the involvement of Europe's energy companies in reinvigorating the EU's emissions trading system.
British Columbia Premier Christy Clark spoke at the World Bank Group about the effectiveness of her Canadian province's carbon tax and the role of subnational governments in setting policies that can address climate change.
"We’ve had a pure carbon tax for seven years in BC. It covers 72 percent of emissions in the province, so it is very broad. It is now at about 30 dollars a tonne. So we have seen it operating for a long time.
I don't know if we are unique in the world, but we are proud of the fact that we have taken 100 percent of the revenues that we have collected through the carbon tax, which is over 6 billion dollars, and we have invested that plus some in tax cuts.
The Canadian Province of Ontario announced last month that it would join California and Quebec in linking their cap-and-trade programs to curb greenhouse gas emissions. The move was met with approval by carbon market watchers, as local governments showed how they could avoid the lengthy political battles sometimes faced by national governments preparing submissions to the United Nations Framework Convention on Climate Change.
At a time when governments are looking for ambition, could this sort of local government action be the start of something much bigger?
Last week, I attended the Navigating the American Carbon World (NACW) event in Los Angeles to explore whether the momentum we are seeing to price carbon is evident on the ground. I found a lot of local government leadership on climate change.