The subtle approach to global carbon pricing

So far, the COP26 climate conference in Glasgow seems to have made only limited progress. Welcome to an agreement to reduce methane emissions and deforestation. India has joined the climate change dialogue with its own commitment, albeit a very long-term commitment. The unexpected announcement of the United States and China that they will cooperate is fascinating. However, the latest commitments made by countries are seriously inadequate.According to a new United Nations statistics, they will In the process of heating up to 2.7C From the pre-industrial level at the end of the century.

And, most importantly, few people pay attention to the most powerful tool to reduce carbon emissions. My colleagues Tim Harford and Gillian Tate eloquently explained the rationale for global carbon prices. Tim explains economics How a carbon tax can help reduce emissions, the same argument applies to other forms of carbon pricing.Gillian pointed out how Carbon prices can redirect capital flows. But Glasgow will not announce a uniform global carbon price, let alone a sufficiently high price.

Even so, there are still reasons for hope. If you look at the obvious lack of global carbon pricing agreements, there are many developments that are pushing us towards higher carbon pricing.

Although my opening is desperate, one of the developments may be happening at COP26.One of the most… Glasgow’s fierce negotiation field It is Article 6 of the Paris Agreement, concerning the global carbon market and carbon offset mechanism. The previous COP meeting did not define many details, so there is still no good framework for cross-jurisdictional emissions trading.Negotiator is Have been working hard to solve this problem, And may fail-but they may also succeed.

If they do, and emissions and offset markets begin to connect across jurisdictions, we will begin to see carbon prices appear in new places and converge among places where they already have them. What the market does is set prices; as more and better carbon markets are interconnected, more carbon will be priced.

Another encouraging sign is that powerful countries and policymakers are developing policies that help global carbon pricing.this The most important thing is the EU’s intentions Implement the “Carbon Border Adjustment Mechanism” (CBAM): Tariffs aimed at pricing the carbon content of imported goods at the same price as the carbon emitted from domestic production. As a side effect, such a tariff plan would provide something similar to the carbon price of EU trading partners.

Recently, take a look at how the EU and the US deal with steel and aluminum tariffs Hints at future alignment The two groups used trade policies to punish high-emission steel production elsewhere (read China). This sounds like a “carbon club” for a specific industry, and all parties committed to decarbonization have set up common trade barriers to other parties who do not. Like CBAM, the Carbon Club actually allocates carbon pricing to activities in economies that do not belong to it.I am very happy to see the results of the early hints, because I have been arguing that the EU and the US should Set up a carbon club Together.The idea is promote Nobel Prize winner William Nordhaus (which he called the “Climate Club”), and Recently adopted It was proposed by Olaf Scholz, Germany’s newest finance minister, who may soon become prime minister.

The third straw in the wind is how institutions that manage the global economy—in terms of being fully managed—support carbon pricing. first, G20 leaders use it as a tool In the summit communiqué issued on the eve of COP26, German Chancellor Angela Merkel (Angela Merkel) Support it in the speech. The International Monetary Fund proposed a International carbon price floorIt explains how to achieve this goal through a variety of national methods: carbon taxes, price setting in other ways, or emission regulatory limits that can be translated into “shadow” prices. The point is that all of this leads to some form of carbon emission price, which leads to decarbonization returns, and this price is internationally comparable. (PwC has Analyzed the effect Such a carbon price lower limit concluded that it “can pay for itself while reducing emissions by 12 [per cent]”And design through redistribution to achieve a just carbon transition.)

This is a very good proposal. But some people may think this is utopian. However, this year, almost all countries in the world reached an agreement on the minimum level of corporate profits tax. If this is possible, so is the lowest carbon price.

All these developments make me look forward to accelerating the pace of global carbon pricing. It may not always be easy to notice, but progress is being made.

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