World Carbon Price Seen Needing to Increase Sevenfold by 2020

Carbon prices need to jump sevenfold by 2020 from current rates in the world’s biggest market to meet climate goals cost-effectively, according to a commission of economists and scientists.

A price of about $40 a ton along with adoption of other policies that encourage emission cuts would achieve targets in the 2015 climate deal agreed in Paris, according to a report published Monday by a commission of economists and scientists. Under the Paris agreement, almost 200 countries will try to limit the global temperature increase to “well below” 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial levels.

Costs from the higher carbon prices would not hurt ordinary consumers much, said Joseph Stiglitz from Columbia University, who led the High-Level Commission on Carbon Prices with fellow economist Nicholas Stern.

“Businesses are already using prices in the range that we’re talking about,” Stiglitz said on a call with reporters.

New carbon prices in seven jurisdictions including China and South Africa will take the portion of global emissions covered to more than 20 percent in 2017, the World Bank said last week in a separate report. In Europe, which has the world’s biggest greenhouse-gas market, lawmakers are meeting Tuesday to deal with an accumulated glut that’s driven down prices by more than four-fifths in the past decade.

The commission concluded that a $40 to $80 a ton range in 2020, rising to $50 to $100 a ton by 2030, would be consistent with the Paris target.

EU carbon settled Friday at 5.19 euros ($5.80) a ton on ICE Futures Europe in London.

From the report:

  • “Carbon pricing makes sense in all countries, but low-income countries, which may be more challenged to protect the people vulnerable to the initial economic impacts, may decide to start pricing carbon at a lower level and gradually increase over time”: commission member Harald Winkler of the University of Cape Town, South Africa.
  • Commission analyzed national emissions and development pathways, technological road maps and global economic models to reach its conclusions.
  • Eliminating fossil-fuel subsidies would mean lower carbon prices are needed.
  • “A well-designed carbon price is an indispensable part of a strategy for efficiently reducing greenhouse gas emissions while also fostering growth.”
  • Report was put together starting last year by The Carbon Pricing Leadership Coalition, a voluntary partnership of national and sub-national governments, businesses, and civil society organizations that agree to advance carbon pricing through the global economy. It’s housed in the Washington-based World Bank Group.

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