Energy & Environment

New language at Paris climate talks creates room for carbon price

Climate Change, Paris, Conference, Summit, UN
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New language currently being discussed at the Paris Climate Change Conference would call for cooperation on transferable mitigation outcomes between negotiating states. The text supported by the European Union and Brazil would not only allow for trading of emission but also accept offsets into the market. According to the mechanism drafted, countries would put in place an overall emissions cap and continue to push toward stronger goals over time.

{mosads}Emission trading schemes (ETS) has long been a prefered model for the EU as well as Brazil. The European Union has been operating under its own emissions trading scheme since 2005 and is looking to find ways to connect it with new markets. Brazil, on the other hand, is looking to take advantage of its vast forest reserves and find ways to monetize carbon sequestration to fund renewable energy development.

Government leaders and businesses across the globe have shown unwavering support for carbon pricing schemes. The World Banks has been one of the key instigators in the new trend toward carbon pricing. During a lecture at the Sorbonne, Elon Musk, owner of Tesla Motors, SolarCity Corp. and and SpaceX, endorsed the proposal: “If countries agree to a carbon tax and it’s real and it’s not super watered-down and weak, we could see a transition [to clean energy] that has a 15- to 20-year timeframe as opposed to a 40- or 50-year timeframe.”

Why are businesses lining up in support of a carbon fee? “Business has recognized that really putting a price on carbon is really a necessity in order to do the strategic planning that they need to undertake — to make decisions about the kind of projects that they’re going to invest in,” said Richard Eidlin, co-founder of the American Sustainable Business Council. “So the carbon price, whether it’s a tax or emissions trading system, gives clear guidance to companies.”

In the United States, businesses have begun to band together in support for local and national carbon pricing efforts. States including Oregon, Washington, Vermont, New York, Rhode Island and Massachusetts have carbon pricing proposals. At the national level Sen. Sheldon Whitehouse (D-R.I.) has proposed a U.S. economy-wide carbon fee.

“Revenue neutral carbon pricing isn’t about growing the size of government. Nor does it involve direct regulation,” said Whitehouse, when reached for comment. “The idea is so market-based, so respectful of individual choice, it’s won the support of Greg Mankiw, chair of the Council of Economic Advisers under President George W. Bush and adviser to Mitt Romney during his 2012 presidential campaign.” In Massachusetts, State Sen. Michael Barrett (D) is the sponsor of a carbon pricing proposal. The proposal has seen wide business support from important sectors and industries, including the financial sector, technology services and construction.

To our north, the four most populous Canadian provinces will all have some form of a carbon pricing scheme by 2017. British Columbia has had one in place since 2008 that has had astounding results, while Quebec in 2014 opted into the California cap-and-trade program. Canada’s most populous province, Ontario, announced this year that it is starting its own cap-and-trade program. And even Alberta, home to vast amounts of tar sand oil, just announced its own economy-wide revenue neutral price on carbon.

Critics of carbon pricing have concerns over its practicality. For one, calculating an exact price for emissions is complicated. It requires complex environmental and economic models that need to be constantly updated to reflect new information. The countries and businesses use a wide array of estimates: Sweden put it at $168 per ton, the U.S. government estimate is $38 per ton, while Exxon-Mobil uses $60 per ton.

This is why economists suggest a more general approach. Models can assess how a particular price can affect global emissions. Therefore, the strategy is then to identify a temperature target and use the price that would reach that goal. But the only way this can be done is if world leaders come together and decide that they want carbon pricing on the table.

Carbon pricing makes sense; it is a simple mechanism that both businesses and consumers can understand. We are still going to need investment and commitments, technology transfer and a global dialogue to reach our goals. But if we as a global community are going to keep global temperature rise below two degrees Celsius, then we need drastic action. A carbon price is not projected to get us all the way there, but it is the single best step we can take toward a climate change-free future.

Green is the executive director for the Climate Action Business Association (CABA), a Boston-based coalition of businesses taking targeted action on climate change. As an activist, Green has played strategic roles in several of the largest national, as well as international campaigns dedicated to fighting climate change. Since 2012, he has served as a representative to the United Nations focusing on international climate science and policy. He also serves as the chairman for the ASBC’s Committee on Energy and Environmental Policy.

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