The High-Level Commission on Carbon Prices released its report, which concludes that “meeting the world’s agreed climate goals in the most cost-effective way while fostering growth requires countries to set a strong carbon price".
The International Carbon Action Partnership published a study on ways to achieve cost-effective emission reductions under an emissions trading system.
The Japanese Institute for Global Environmental Strategies released a policy brief that argues that carbon pricing can accelerate the diffusion of low-carbon technology in China.
June 2017: Recent reports and studies on carbon pricing and markets highlight that: a strong carbon price is required for meeting the Paris Agreement’s goals; effective policy architectures that support emissions trading systems (ETSs) should incorporate long-term targets, internationally-aligned review cycles and supportive stakeholder constituencies; and a moderate carbon price could accelerate the diffusion of low-carbon technologies in China.
This Update brings you news on these and other publications.
Calls for a Strong Carbon Price
The High-Level Commission on Carbon Prices released its report, which concludes that “meeting the world’s agreed climate goals in the most cost-effective way while fostering growth requires countries to set a strong carbon price”: US$40-80/tonne of carbon dioxide (CO2) by 2020 and US$50-100 by 2030. The Commission was convened by the World Bank’s Carbon Pricing Leadership Coalition (CPLC) at the UN Marrakesh Climate Change Conference in November 2016 and comprises 13 leading economists from both developed and developing countries. [IISD Knowledge Hub Story] [CPLC Press Release]
The International Carbon Action Partnership (ICAP), an international forum of governments and public authorities implementing ETSs, published a study on ways to achieve cost-effective emission reductions under an ETS. Titled ‘Emissions Trading and the Role of a Long-run Carbon Price Signal,’ the study focuses on characteristics of long-term, low-uncertainty policy architectures that enable proper functioning of market adjustment tools. It finds that: stronger commitment to longer-term targets improves the conditions for low-carbon investment; long-term decarbonization plans and alignment of review cycles to the required ratcheting up of ambition under the Paris Agreement may improve credibility of long-term targets; and the distribution of ‘climate rents,’ the engagement of stakeholders and the increased visibility of co-benefits may assist in building supportive constituencies. [ICAP Publication]
Pricing Carbon in China
The Japanese Institute for Global Environmental Strategies (IGES) released a policy brief that argues that carbon pricing can accelerate the diffusion of low-carbon technology in China. Focused on China’s most energy-intensive industries, the study finds that Chinese companies prefer a short payback period for low-carbon technologies (many of which are profitable but require some initial investment), which could be achieved by implementing carbon pricing policies. The study argues that even a moderate carbon price could accelerate the diffusion of many low-carbon technologies without significantly reducing companies’ profits. [Carbon Pricing to Accelerate the Diffusion of Low Carbon Technology in China]
Another study on China, by the Technical University of Denmark (DTU), explores local stakeholder consultation in climate mechanisms, focusing on the country’s Clean Development Mechanism (CDM) policies and practices in this regard. Identifying weaknesses in existing practices and procedures, the study notes these are not unique to China and suggests drawing lessons for local stakeholder consultation rules from REDD+ and the Green Climate Fund (GCF). [DTU Article]
Assessing Sustainable Development Benefits
A further study on the CDM by the DTU draws lessons from the CDM Sustainable Development co-Benefits Tool (used for highlighting sustainable development benefits of CDM activities) for the UNFCCC negotiations on the Paris Agreement Article 6.4 (mechanism to contribute to the mitigation of greenhouse gas (GHG) emissions and support sustainable development). The study concludes that the Paris Agreement’s “Sustainable Mitigation Mechanism” has “a stronger political mandate than the CDM to measure that sustainable development impacts are ‘real, measurable and long-term.’” It makes recommendations for an improved CDM Sustainable Development Tool, noting that these are directly relevant for informing the design of cooperative approaches under the Paris Agreement. [DTU Article] [UNFCCC CDM Sustainable Development co-Benefits Tool Webpage]
Offsetting Emissions from Aviation
In the area of international aviation, the Food and Agriculture Organization of the UN (FAO) and the Global Soil Partnership released a study on the potential of soils to contribute to offsetting emissions from this sector. The study, titled ‘Soils’ Potential to Contribute to Offset International Aviation Emissions,’ argues that soils can provide a significant potential for offsetting CO2 emissions in the context of the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), as they have the capacity to sequester up to 327 million tonnes of carbon per year. One such option is comprised by actions aimed at increasing carbon inputs into the soil and preventing soil carbon losses, including through sustainable soil management practices, which could contribute to the achievement of numerous Sustainable Development Goals (SDGs). [Soils’ Potential to Contribute to Offset International Aviation Emissions]
* * *
The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past IISD climate finance updates can be found under the tags: Finance Update: Climate Change; and Finance Update: Sustainable Energy.