WHY IS EVERYONE TALKING ABOUT CARBON PRICING?

SHIFTING 'TAKING ACTION' TO 'CLIMATE AMBITION'

"To meet the objective of the Paris Agreement, we need to get to... scale. None of the critical investments will be possible unless we get the policies right. That means creating incentives for change - removing fossil fuels subsidies, introducing carbon pricing, increasing energy efficiency standards, and implementing auctions for lowest cost renewable energy.”
 
World Bank President, Jim Yong Kim, at the One Planet Summit, December 2017.

What is a Carbon Price?

The phrase “put a price on carbon” is becoming increasingly common in corporate and government conversation as discussions of how to address climate change move from concern to action. The World Bank Group, business groups, and investors have called on governments and corporations around the world to support carbon pricing to bring down emissions and drive cleaner investments in cleaner technologies.

 

A price on carbon helps shift the burden for the damage back to those who are responsible for it, and who can reduce it. Instead of dictating who should reduce emissions where and how, a carbon price gives an economic signal and polluters decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it. In this way, the overall environmental goal is achieved in the most flexible and least-cost way to society. The carbon price also stimulates clean technology and market innovation, fueling new, low-carbon drivers of economic growth.

There are two main ways 

Both options push companies to cut their emissions

1

CARBON TAX

Everyone pays tax on the fossil fuels they use, based on the carbon content. Taxes can be established for governments and/or companies.

2

CAP AND TRADE

A Government or Region sets an emissions cap. They give away or auction permits that allow emissions up to that total. Companies can then buy and sell their permits.

Carbon Pricing is already used all over the world. 

About 46 countries and more than 28 states, cities and regions have put a price on carbon (or will soon). In 2019, these systems will cover 11 GtCO2e, representing 19.6% of global GHG emissions.

"A price on carbon unlocks the potential of the private sector, like business and investors to contribute more and faster to addressing climate change by ensuring an economic incentive."
 
Feike Sijbesma, CEO of Royal DSM, World Bank Climate Leader and Carbon Pricing Leadership Coalition Champion and former co-chair

The private sector is taking proactive steps to put a price on carbon.

Internal carbon pricing has emerged as an important tool to help companies manage climate risks and identify opportunities in the low-carbon economy transition. 

In the past 2 years, there has been a particularly strong increase in corporate internal carbon pricing initiatives in China, Japan, Mexico, and the United States. Further adoption of internal carbon pricing is anticipated following the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures

more than 100

with

FORTUNE

GLOBAL

500

US$7

trillion in collective annual revenue

1,400

companies

Disclose to CDP their current practices or plans to use Internal Carbon Pricing

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