On 30th September, the Climate Crisis Advisory Group (CCAG) sets out its seven recommendations that global leaders at COP26 must consider to make carbon pricing more effective.
Its latest paper highlights the critical importance of a comprehensive financial and regulatory ecosystem incentivising emissions reduction and removal, supported by a properly functioning carbon price.
While fiscal and regulatory policies to incentivise carbon dioxide emissions reductions have succeeded in slowing the rate of CO2 growth over the past decade, emissions reductions from the advanced economies overall have fallen far short of what had been promised. It is estimated that today’s policy ambitions and targets would likely lead to global warming of around 2.7C by the end of the century – a temperature that will result in the planet facing climate disaster.
Current Nationally Determined Contributions (NDCs) suggest that the planet is on track to be 16% over 2010 levels of global greenhouse gas emissions in 2030, whereas to hold warming to less than 1.5C, we need to be at 45% below 2010 levels in the next nine years.
The Group concludes that current carbon policies do not go far enough and urgent reforms are required to ensure their efficacy. Its seven demands are as follows:
- To move at the pace and scale required in reducing carbon emissions, a higher carbon price is necessary;
- Greater sectoral coverage is needed – a wider portfolio of policies, applicable to all competitors, is needed for businesses to consider deep mitigation actions;
- Greater geographical coverage is needed;
- Coverage of all sources of greenhouse gas emissions is needed (i.e. beyond CO₂);
- Carbon price revenues must be openly and equitably redistributed to avoid financial hardship for vulnerable and low-income households;
- Increased financing must be made available to low-income countries by high-income countries to enable strong national fiscal and regulatory policies;
- Governments must be prepared for institutional changes in policy making to include systems thinking, learning and adaptation and knowledge-sharing across countries adaptive
The paper has been launched in advance of COP26, where the rules on the operation of carbon markets set out in Article 6 of the Paris Agreement are scheduled to be agreed, with significant implications for the current and future price of carbon.
CGLN Founder and Chair of the CCAG said:
“Carbon pricing schemes have had a positive and significant impact on emissions reductions so far, particularly when it comes to transitioning away from the use of coal and oil, as well as in some areas on clean energy innovation.
“A properly functioning carbon price covering a large number of countries would send clear signals across global supply chains and help address the distributional impacts of the energy transition. Without significant international fiscal policy revisions such as this, we will categorically lose our fight against climate change, where climate-related disasters become our only certainty.”
An alternative approach to carbon pricing
CCAG also proposes an alternative approach to carbon pricing – one which levies charges at the point of fossil fuel extraction, based on the amount of CO₂ formed in any process in which it would be used as fuel.
The benefits of such an approach include providing a price more easily comparable across borders, more inclusive of the range of end-uses for fossil fuels, as well as forging a linkage between the price of extraction and the price of usage.
CCAG has a clear, three pillar strategy for tackling the climate crisis
- Current targets for greenhouse gas reduction are not enough. Nations need to triple their emissions-cutting pledges urgently to play their par
- We need large scale investment to develop, research and scale techniques to remove greenhouse gases from the atmosphere
- Thorough and urgent research is needed to explore and investigate safe methods and technologies that could repair parts of our damaged climate systems
This report is the fourth in the monthly series from the Group, established in June and comprised of a selection of world-renowned climate experts across a range of disciplines.