By Jeff Swartz, Director of International Policy at the International Emissions Trading Association (IETA)
With carbon pricing policies emerging around the world and the recent show of public support for carbon pricing from 74 national governments and more than 1,000 businesses, one piece of the puzzle that needs to be solved is how to connect systems to create an international carbon pricing framework.
In the lead up to the Paris negotiations this December, governments from around the world – including China, South Africa and Russia – have signaled their willingness to apply a price on carbon, yet businesses and civil society know that we will not be able to move towards a fully functional low-carbon global economy by operating under a fragmented system of international carbon pricing policies. Furthermore, the IPCC’s verdict on the need to increase international cooperation on climate mitigation policies highlights the need for an international carbon pricing framework.
By Michael Carter of the University of California-Davis and the National Bureau of Economic Research, and Sarah Janzen of Montana State University
Recent climate-related natural disasters, including droughts, floods and wildfires, have revealed widespread vulnerability of poor populations. Climate-related hazards not only take lives, they destroy homes, compromise livelihoods, reduce crop yields, increase food price volatility, and spawn food insecurity. The inability of poor households to sustain critical investments in child health and nutrition during and after such shocks unfortunately means climate-related hazards are likely to result in permanent deleterious consequences for the next generation.
Contingent social protection measures—which release transfers in the wake of a shock—may improve resilience among the poorest, but the situation is more complex than might first meet the eye. It is not only the poorest who may merit inclusion in contingent social protection schemes. Several recent analyses of droughts show that it is not only the destitute who severely restrict consumption (and undercut investments in child health and nutrition), but also a group of households who hold modest asset stocks. These households, whom we might label the vulnerable, (because they are not destitute, but face the risk of becoming so), face an unpleasant choice. They can sell scarce assets in order to sustain consumption in the face of drought-induced income declines, or they can hold on to their productive assets to avoid being locked into a poverty trap. While their logic of holding on to remaining assets (often called asset smoothing) is unassailable, it induces the kinds of consumption declines that compromise the human capital of the next generation.
Barbara Buchner is senior director at the Climate Policy Initiative and lead author of the Global Landscape of Climate Finance reports.
In December 2015, countries will gather in Paris to finalize a new global agreement to tackle climate change. Decisions about how to unlock finance in support of developing countries’ low-carbon and climate-resilient development will be a central part of the talks, and understanding where the world stands in relation to these goals is a more urgent task than ever.
Climate Policy Initiative’s Global Landscape of Climate Finance 2014 offers a view of where and how climate finance is flowing, drawing together the most comprehensive information available about the scale, key actors, instruments, recipients, and uses of finance supporting climate change mitigation and adaptation outcomes.
New carbon pricing systems are being developed in China, Chile and other countries to help reduce greenhouse gas emissions and encourage clean energy and sustainable development. This will mean new reporting requirements and regulations for an increasing number of national and multi-national companies.
To help corporate leaders prepare, we studied the experiences of three companies that are already operating within one or more carbon pricing systems and the steps they took to prepare for a world where greenhouse gas emissions have a price.
Our report released today by the Partnership for Market Readiness describes the impacts of a changing climate on business strategies, analyzes risks and opportunities as new climate policies are implemented, and distills lessons learned by Pacific Gas and Electric Company, Rio Tinto, and Royal Dutch Shell. The three companies represent a variety of energy-intense industries, including oil, gas, metals, mining and energy generation, transmission and distribution. Two operate in more than one jurisdiction with emissions trading.
Around the world, countries are developing ways to put a price on carbon to fight climate change. They are choosing different approaches depending on their national circumstances. China has pilot emissions trading systems (ETS) in seven provinces and cities and is planning a national ETS in 2016. Chile recently approved a carbon tax to start in 2018. Mexico and Colombia are implementing sector-wide crediting mechanisms that reward low emission programs with carbon credits, for example in the transport sector by substituting conventional vehicles with electric cars. Many countries have renewable energy portfolio standards and feed-in tariffs.
These domestic initiatives are crucial to lowering greenhouse gas emissions. Each is being designed individually, though, creating a patchwork of regulations and missing the economy of scale that a connected system could bring.
The World Bank Group has been working on ways to network these initiatives and facilitate an integrated international carbon market.
This week in London, the Prince of Wales brought together representatives from government, the private sector, and civil society around the goal of protecting and restoring tropical forests. The gathering took stock of forest commitments made at the UN Secretary-General's Climate Summit last September and identified priority actions for 2015 – a critical year for advancing progress on the inseparable issues of development, poverty, and climate change.
With all eyes on a new climate agreement in Paris later this year, healthy forests and landscapes are seen as critical to cutting greenhouse gas emissions to net zero before 2100. The key underlying question is how to best achieve a true transformation in how we manage our forest landscapes, which are still degrading at a rapid rate.
Amy Ericson, U.S. country president for technology company Alstom, spoke at the World Bank Group about the interplay between carbon pricing and innovation that can lower carbon emissions for cleaner, more sustainable development. Alstom is involved in the Carbon Pricing Leadership Coalition.
In the corridors and sessions at the UN climate talks in Lima over the past two weeks, there has been extraordinary power and energy. We’ve seen material action as the financial sector starts to transform how it thinks about long-term risk. Coalitions are working together on tax reform, regulatory reform, and putting a price on carbon, and country after county is saying that they have been able to clean up their regulatory framework and put themselves in a position to grow.
The Paris negotiations where the world will be writing a new international climate agreement are just a year away, and here in Lima, delegates from around the world are discussing their national commitments and contributions that will largely determine the level of ambition in that 2015 deal.
As we trace the path to a resilient and decarbonized economy, we must keep in mind that the Paris agreement will set a framework for the period post-2020. What happens until then?
The science tells us that, even with very ambitious mitigation action, we have already locked-in warming close to 1.5°C above pre-industrial levels. Climate change impacts such as heat-waves, droughts, storms, and other weather extremes may be unavoidable.