Head of IMF urges countries to adopt higher carbon prices

Polluting cannot be as cheap as it is today – was the message from ministers, business executives and civil society leaders who came together at the third high-level annual assembly of the Carbon Pricing Leadership Coalition (CPLC) last week. Carbon Market Watch will join the CPLC’s steering committee to advance NGO engagement and help ensure that the global efforts to put a price tag on pollution work for the climate and the people.  

Carbon Market Watch will join the Carbon Pricing Leadership Coalition (CPLC) steering committee

Big emitters currently get a free pass to pollute, while the society at large, and disproportionately the most vulnerable groups – such as women, minorities, and indigenous communities – carry the largest burden of global warming. Putting a meaningful price on carbon enables investors, producers, and consumers to incorporate the societal cost of pollution in their decision making and incentivizes the shift away from fossil fuels.

But for carbon prices to play this role, polluting cannot be as cheap as it is today.

As Jim Kim, World Bank Group president pointed out during the CPLC assembly, most carbon prices fall far below the recommendations by the High-Level Commission on Carbon Prices. Agreeing with Mr Kim, IMF director Christine Lagarde urged countries to phase-in higher carbon prices up to 2030 and reinforce the Paris process by collaborating on carbon price floor arrangements. Prices rising to over $70 per tonne of CO2 will be needed by 2030, according to an analysis by the International Monetary Fund.

At the moment, only 0.3% of emissions are taxed at or above what is a very conservative estimate of climate costs (€30/tCO2), and most of the largest polluters enjoy exemptions in the form of over-generous free allocation under carbon markets.

Better public engagement is key to achieving effective pollution prices

Lack of public engagement and the disproportionate influence of high-emitting industries lobbying to keep carbon prices low are among the obstacles in the way towards effective prices on pollution.

The debate on the carbon-free transition, including on who foots the bill, must involve all parties of the society. Carbon pricing schemes, like all other policies, need to be developed not only for but also with the people.

Mobilising voices across the society allows policymakers to make their decisions with broader societal interests in mind. Such increased cooperation among actors at all levels of the society can lead to broader support for, and ultimately, the adoption of, carbon pricing that works for the climate, generating revenues to support the just transition of affected communities.

The Carbon Pricing Leadership Coalition will establish a new civil society working group to ensure that NGOs have both the capacity and the opportunities to engage in carbon pricing debates.

More space must be given for arguments that go beyond the oft-repeated ‘threat’ to competitiveness, and include the concerns and views of the society at large. This can lead to higher carbon prices with fewer exemptions, supporting the phase-out of fossil fuels and advancing global and intergenerational solidarity.

Read more in our input to the Paris Agreement stock-taking exercise knows as the Talanoa Dialogue here.