Carbon Prices Are Spreading Across The Globe, But Not Fast Enough For Paris

The world now has 57 carbon-pricing programs covering about 20 percent of greenhouse-gas emissions, but they won't be as effective as they could be, experts said, until more of the world participates.
That's because covered industries worry about international competitors who don't have to pay a carbon price, and that concern ends up capping the price on carbon.
"That is why it is so important that the world at large can move on carbon prices," said Jos Delbeke of the European Political Strategy Centre, who oversaw Europe's Emissions Trading System (ETS) until last year, "because if you are an island of carbon prices it is going to be damn difficult to continue with the program."
The European program has helped propel a 29 percent drop in emissions over 15 years, but it still gives away 45 percent of its carbon allowances to the steel, chemical and cement industries to offset the potential loss in competitiveness.
"I only have to mention the steel sector and the hard competition that was taking place in the steel sector over the last five to ten years," Delbeke said, "so as to indicate that was something we had to do protect the competitiveness of our companies by giving them a fair share of free allowances."
Free allowances become unnecessary when all competitors pay a carbon price. Even with the allowances, Delbeke counts the program a success. The transport sector, which is not covered by the ETS, has seen emissions rise over the same period.
"The EU ETS has been the champion for reducing the greenhouse gas emissions in Europe," Delbeke said last week in a webinar hosted by the Center for Climate and Energy Solutions, "and we were able at last to re-establish a decent price which is hovering around 30 euros per tonne for now and we will stay in that range for the years to come."
While Europe's price has raised significantly in the past two years, it remains low for the Paris Agreement. In a report issued two years ago, the World Bank concludes that carbon prices should be in the range of $40 to $80 dollars per ton of CO2 by 2020 and $50 to $100 by 2030 to be aligned with the Paris agreement.
"On prices we see significant variation between $1 and $127 per ton of CO2," said Tom Erb of the World Bank's Carbon Pricing Leadership Coalition. "The basic summary here though is that prices remain too low to have a significant dent on emissions or to be in line with the goals of the Paris agreement."
Only 5 percent of covered emissions are priced at a level compatible with Paris, Erb said.
The world's youngest carbon price may be in South Africa, where the program launched in June. South Africa's carbon tax is 120 Rands per ton, "which, you know, on a good day represents about eight to nine dollars," said Henk Sa of EcoMetrix Africa, a climate finance consulting firm.
"So how was the tax received? I guess it was received the old-fashioned way," Sa said.
Industry worried the tax was too expensive and would impact profitability and competitiveness, Sa said, while government worried it was too cheap and wouldn't meet the country's commitment to reduce emissions. Government promised to raise the price and reduce the discounts for industry.
"This was then obviously met by an industry saying, well, that's going to quickly and it's going to lead to an economic downturn," Sa said. "But I guess that's how these discussions always unfold."
Watch Delbeke, Erb and Sa talk carbon pricing: