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The past two years of the global pandemic profoundly impacted our societies and economies. The COVID crisis heightened the need for multilateralism to tackle global challenges.
Even as the worst of the pandemic starts to recede, the war in Ukraine threatens to impact global development outcomes. At the same time, climate impacts continue to mount. The findings of the latest IPCC reports provide a stark warning. We must decarbonize our economies at an accelerated pace and scale and reach net zero emissions by 2050 to avoid fundamentally altering our planet's climate and its irreversible impacts on development. We must take bold and swift action and we must do so now to ensure that we can realize green, resilient and inclusive development.
The good news is that we already have many of the tools to facilitate a transformative shift towards a net-zero future – pricing carbon chief among them. And while coverage and price levels are still too low – less than 4% of global emissions are currently covered by a carbon price within the range needed by 2030 to meet the Paris Agreement temperature goals – there are clear, positive signs. Emissions trading systems (ETSs) were largely resilient to reduced economic activity as a result of COVID-19. Several countries increased their carbon tax rates and adopted more ambitious trajectories, and pilot ETSs are being considered in a number of countries, including national and regional programs.
After six years of negotiations, COP26 in Glasgow finalized the long-awaited Article 6 of the Paris Agreement rulebook for international cooperation through carbon markets. It gives countries the tools they need for environmental integrity to avoid double counting and paves the way to get private capital flowing to developing countries. The finalization of the rulebook acts as a primer for carbon markets. It holds a promise of decisive action as more companies and governments ambitiously explore putting a price on carbon through the market to incentivize climate action and achieve their long-term target of net-zero emissions by mid-century.
The World Bank Group is uniquely poised to support clients to prepare, plan, build capacity and implement carbon pricing policies and reach their net-zero goals. Last year, we operationalized the Partnership for Market Implementation, a 10-year program that will build on our earlier efforts to ready countries for carbon pricing.
Last year, we also published our Climate Change Action Plan (CCAP) 2021 - 2025 – which includes carbon pricing as an integral tool to scale up transformational climate solutions.
The Carbon Pricing Leadership Coalition is the main vehicle for countries, private sector, and stakeholders to collectively share their best practices on carbon pricing policies, disseminate essential research, amplify leadership, and inspire others to follow suit. The CPLC has set the standard for conversations on carbon pricing – from its Task Force on Net Zero Goals and Carbon Pricing, which analyzed the effective range of these policies, to its most recent Net Zero Goals and Carbon Pricing Report, which laid out how to harness the potential of carbon pricing in implementing strategies to get to net-zero emissions by mid-century. I have personally enjoyed being part of many of these conversations because they highlight not only leadership but also what goes wrong and how to learn from that.
As ministries of finance, planning and trade as well as companies and industries start to calibrate policies for carbon markets, the CPLC will continue to engage partners and support countries to plan, prepare and scale up these approaches. I hope they will find the insights in this sixth leadership report from CPLC valuable – ranging from developments in the carbon markets to promising policies, tools, and technologies.
This piece appears as the foreword of the Carbon Pricing Leadership Report 2021-22. The full report is available for download here.
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