Carbon pricing in focus at webinar

Experts called for urgent action on stopping the rise of carbon emissions and building a common approach to global carbon pricing during a webinar organized jointly by the International Finance Forum, the Task Force on Carbon Pricing in Europe and the Paulson Institute.

"We do think stopping the rise of carbon emissions globally and reversing the trend in the near future is a necessity to succeed in the fight against global warming. And it is feasible, if we adopt the proper means," said Edmond Alphandery, a former French Minister of Economy and chairman of the European Task Force on Carbon Pricing.

"We consider that the price of carbon is a major device, because the objective is to shift from fossil fuels to low-carbon resources."

The webinar brought more than 40 major policymakers, business leaders, experts and high-ranking officials from across the globe, who shared their expectations for the upcoming 26th UN Climate Change Conference of the Parties in Glasgow, which will start on Oct 31.

They called for urgent action on stopping carbon emissions and wide and in-depth discussions on global carbon pricing as an incentive toward net-zero carbon output at Glasgow.

The participants also exchanged news and views on the impact of the European Carbon Border Adjustment Mechanism, the global approach to decarbonization, technologies such as carbon capture and storage, removing methane from the atmosphere and nuclear power as an alternative to fossil fuel in energy transition. Some of the topics are likely to be discussed at the Glasgow COP26 by world leaders as well.

Chairman of the Paris COP21 Laurent Fabius said he hopes the climate summit can achieve four objectives to fulfill the goals of the Paris Agreement.

According to him, first it is necessary to reach a consensus on the methodology for carbon pricing. The second is to guide more private capital to finance the fight against climate change. Enhancing climate ambitions would be the third step and it would be followed by several important evolutions in the Paris Agreement, including connecting climate change and biodiversity, social justice and more sectors taken into consideration by the international community.

"In all these expectations, carbon pricing is the key," Fabius said. "Glasgow will not make a decision on carbon pricing, but it would be at the background of many discussions. And it is very important whatever the results of Glasgow are, the US, China and the European Union must keep on trying to develop carbon pricing and to educate the public and decision-makers that it is probably the most efficient tool for our common goals."

Based on the latest research from the commission, Energy Transitions Commission Chairman Adair Turner listed six possible technical actions that could help limit the rise in world temperatures to 1.5 C, including electrification of road transport, reducing methane emissions from fossil fuels, eliminating coal use from major industrial sectors, ending deforestation and actions related to climate financing in steel, shipping and cement.

Turner said carbon pricing can play a crucial role in helping achieve net zero by 2050 in these sectors and will help reduce emissions significantly in the 2020s.

"The net-zero steel initiative aims at achieving net zero in the steel sector by 2050, along with a 35 percent reduction in emissions even in the 2020s if there was a serious carbon price. So I think we really need to focus not on carbon pricing as a generalized concept, but on how it can accelerate decarbonization of these hard to obey sectors," Turner said.

Vitor Gaspar, director of the fiscal affairs department of the IMF, said carbon pricing is clearly in the background of discussions.

"Carbon pricing is observable and easy to understand, so it is a natural instrument for global cooperation. We have shown in our research an agreement with just six large emitters in alphabetical order, Canada, China, European Union, India, the United States and the United Kingdom would be enough to put the world on a good path to limit temperature increases to 2 C," Gaspar said.

He added carbon prices are providing the grammar of the argument for global cooperation.

"I think the bottom line delivery at Glasgow should be the rulebook of the Paris Agreement that makes the nationally determined contributions, the monitoring, the reporting and the verification transparent and accountable," said Jairam Ramesh, former minister of environment of India.

As a veteran negotiator of the previous COP, he called for the need for "a sense of realism as to what the COP can deliver and cannot deliver."

According to him, people should not get sidetracked into net zero by 2050 or 2060 when very few countries will be held accountable, suggesting it was necessary to focus on some closer targets in the 2020s and 2030s such as the milestones on transport, energy transition and in industries that need strategy and international agreements.

He also expected greater recognition of the interaction between biodiversity and climate change and agreement on what countries should do for biodiversity and biodiversity management, which he said are crucially important.

Apart from the consensus on the importance and positive impact of carbon pricing, the opinions of the participants from the EU and emerging markets such as India and Brazil were widely divided on the impact of CBAM in Europe. Participants from European countries want the CBAM to be a tool to adjust competitiveness and an incentive for low-carbon innovation. However, officials from India, for example, regard CBAM as a tool of protectionism.

Martin Wolf, the chief economic commentator at the Financial Times, pointed out CBAM may affect the competitiveness of products from different countries and warned it may trigger trade wars if countries get tougher on the issue.

As for the global leadership required for the successful fight against climate change, Zhu Xian, vice-president and general sectary of IFF, pointed out an acceptable time frame and clear targets sector by sector are needed to ensure the commitments of different countries are really implementable, particularly in emission-intensive sectors.

Zhu, also former vice-president of the World Bank and New Development Bank, said strong leadership is also needed for affordable and reliable alternative solutions that are crucial for the ongoing energy crisis, adding it will also help avoid the pushing back of fossil fuels to solve temporary problems.

Zhu also reminded all participants on providing financing to developing countries in their fight against climate change, promoting low carbon technology development and innovation.

"My own point is certainly technology development innovation, and this should be driven by the private sector and by business communities. But on the other hand, governments have a role to support technology's application and utilization, as well as its commercialization."