World leaders launch coalition on carbon pricing

Wednesday 02 December 2015

Countries agree on imposing carbon tax and adopting a market mechanism for trading carbon as part of their plan to reduce emissions


                    Leaders reached an agreement in putting a price on carbon to incentivise reduction of greenhouse gas emissions in an effort to keep global warming under 2 degrees Celsius
Credit: Daniel Boyd/Flickr
Leaders reached an agreement in putting a price on carbon to incentivise reduction of greenhouse gas emissions in an effort to keep global warming under 2 degrees Celsius Credit: Daniel Boyd/Flickr

Leaders reached an agreement in putting a price on carbon to incentivise reduction of greenhouse gas emissions in an effort to keep global warming under 2 degrees Celsius
Credit: Daniel Boyd/Flickr

Heads of states from about 20 countries came together to officially launch the Carbon Pricing Leadership Coalition recently in Paris.

The coalition members promised to include measures such as imposing carbon tax and adopting a market mechanism for trading carbon as part of their plan to reduce emissions.

However, differences cropped up between some of the speakers and German Chancellor Angela Merkel on the issue of calling for a universal carbon market. French president Francois Hollande said different market mechanisms in different parts of the world would work.

But there was universal agreement in putting a price on carbon to incentivise reduction of greenhouse gas emissions in an effort to keep global warming under 2 degrees Celsius.

The French president added that carbon prising was an essential tool in incentivising low-carbon development and giving the right signals to investments.

He spoke about the carbon market that Europe has managed to establish and also highlighted other global initiatives such as the trading system in California, the tax on coal in India and the carbon pricing system that China is going to launch.

Hollande also cautioned that it was not necessary for every country and region to have the same price of carbon or the same mechanism for trading or imposing taxes.

Merkel said there were two essential requirements for carbon markets to be successful across the world. The first is creation of a level playing field in terms of pricing and the second is inclusion of the whole world in the market mechanism.

Ethiopia was one of the least developed countries also pushing for the introduction of carbon markets. Explaining the reasons for doing so, Prime Minister Hailemariam Desalegn, said, “We have an interest in seeing that climate change is effectively addressed. Therefore, we will support any global effort to reduce emissions. There is also ample evidence that carbon pricing does this in a cost-effective manner. A number of countries are already doing this in one way or the other”.

He also added that pricing of carbon could be a significant source of finance and technology in supporting climate action.

Golabally, a price on carbon in one form or the other, covers about 12 per cent of global greenhouse gas emissions. The proposed domestic emission trading scheme in China could take this figure up to 25 per cent. So, carbon markets definitely have the potential to make a difference in reducing greenhouse gases. However, past experience of carbon markets and the clean development mechanism projects have shown that estimating carbon emissions saved and then pricing it can be a very tricky issue. Clear mechanism to do this in a transparent manner would be required if the initiative of this new coalition is to gain traction in the ongoing negotiations.

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