The transition from an economy fueled by fossil fuels to one powered by renewable energy can be as transformative as the agricultural and industrial revolutions. However, despite the fact that the survival of the planet is at stake, the resistance proves difficult to overcome.
At the moment the commitments of net zero emissions of greenhouse gases from the US, China and Europe allow the world to limit the increase in global temperature to less than 2º with respect to pre-industrial levels. Even the Agreement offers options for cooperation between countries. But coal, oil and gas lobbies have been fiercely opposed and there is wide divergence in emission prices from country to country. Furthermore, as former Bank of England Governor Mark Carney has warned, he is hampered by the “tragedy on the horizon” – that is, the current generation lacks direct incentives, as the catastrophic impacts of climate change will not be felt for decades.
So carbon pricing hasn’t gotten off the ground. But a mechanism can help change the behavior of businesses and consumers and make the difference between stopping climate change or getting it out of control and is likely to be part of the United Nations climate talks in Glasgow later this year.
Currently the world average price is two dollars/ton of CO2 and according to the International Energy Agency, it must increase to 75 to 100 dollars per ton by 2030 and 125 to 140 by 2040 to meet the Paris targets. In addition, World Bank models show that pricing can halve the cost of such targets, saving $250 billion by 2030. For their part, researchers at the University of California, San Diego estimate that the social cost –empirical estimates of economic damage from climate and socioeconomic projections– requires the staggering price of $417/tonne.
Another problem is that they currently represent about twelve gigatonnes equivalent, just under a quarter of the annual global greenhouse gas emissions. The US, the world’s biggest polluter, doesn’t even participate in the carbon market at the federal level. In any case, European countries are an example. Sweden applies the highest tax, 1,190 crowns (117 euros) per ton and covers 40% of its emissions. In addition, in Europe, the largest and oldest market in the world, prices have multiplied by five since 2018.
The fact is that the Paris agreement did not include a provision for price fixing and lack of a harmonized and unified world market. Even companies, especially in energy-intensive industries, can move from countries with high CO2 emissions costs to those with more lax restrictions, a phenomenon known as So a renewed international effort can encourage more countries and regions to adopt carbon schemes. long-term pricing and avoid flight. Brussels, in line with the Green Pact and , has proposals to review and expand its system. China has launched its national carbon market and expects its average price to reach 66 renminbi ($10)/ton by 2025 and 77 renminbi by the end of the decade. It may become the largest carbon market in the world. For its part, the American Petroleum Institute, a powerful fossil fuel lobby group, is backing the introduction of carbon prices.
One way to improve the system is to expand carbon credits. With this, governments can grant credit to companies that reduce their footprint through capture and storage technologies, reforestation or energy efficiency. In this way, companies achieve flexibility to comply with regulations. In addition, effective carbon pricing can accelerate the pace of innovation in clean energy technologies and promote faster and broader adoption of products and services not yet commercially viable. they are combined with carbon storage and can be competitive if the carbon price is set at around €60-70/tonne. Other technologies include advanced power transmission mechanisms, as well as next-generation batteries. The International Energy Agency estimates that these technologies can reduce global emissions in the energy sector by almost 35 gigatons by 2070, which is considered sustainable.
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