Negotiate a world carbon price signal, now

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

This article is part of our special report Rio+20: Charting a green future?.

Every country in the world should each make a commitment to introduce a carbon price aligned with a scientifically-validated international standard, say Stéphane Dion and Éloi Laurent.

Stéphane Dion is a member of the House of Commons of Canada; as Canada's then Minister of the Environment, he chaired the 11th conference of the parties to the United Nations Framework Convention on Climate Change (COP 11), held in Montréal in 2005. Éloi Laurent is senior economist and scientific advisor at the Observatoire français des conjunctures économiques (OFCE), and professor at Sciences Po (Paris) and Stanford University.

"Two decades after the 1992 Rio summit, with a new climate conference taking place in Bonn, we must admit a collective failure in combating human-induced climate change. We will not escape serious climate disruption if we keep going down that road. We must change direction, and we must move quickly.

The International Energy Agency forecasts warming of over 3.5º C by the end of the 21st century if all countries respect their commitments and warming of over 6º C if they content themselves with their present policies. At that level of warming, climate science warns that our planet will become much less hospitable for humans and virtually all forms of life.

At the December 2011 Durban Conference, countries expressed “grave concern” regarding the gap between their own commitments and achieving the objective of a 2º C limit on increased global warming (compared to pre-industrial era). They promised to 'raise the level of ambition' to bridge this gap. Yet, they didn’t commit to achieving more stringent objectives. We are thus facing an increasingly untenable distance between the urgency of taking action and the inertia of international negotiations.

Developed countries are refusing to strengthen their climate policies as long as other large emitters refuse to follow suit. But emerging economies, particularly China and India with Gross Domestic Product annual growth rates of between 8% and 10%, will not accept absolute reduction targets for GHG emissions. On the other hand, these countries might be more open to the idea of a harmonised levy of a price per tonne of carbon dioxide, a price from which they would derive revenues, and which their economic competitors would also be required to levy.

In our view, the best international co-ordination instrument we can establish to combat climate change is such an harmonised carbon price signal. We therefore propose that upcoming negotiations now focus on this essential objective.

Here is what we propose: countries would each make a commitment to introduce, in their respective jurisdictions, a carbon price aligned with a scientifically-validated international standard, in order for the world to achieve or at least come as close as possible to the objective of keeping global warming below 2º C over pre-industrial era levels. Countries may levy this price through a carbon tax or through the allocation of emission quotas (cap and trade i.e. carbon market).

Governments would be free to invest, as they see fit, revenues from the carbon emission levy and from the corresponding elimination of fossil energy subsidies. For example, they could invest in research and development in clean energy, public transportation, etc. They could also choose to address social inequalities with respect to access to energy.

Developed countries would be required to set aside part of their revenues to help developing countries introduce mitigation, adaptation and carbon sink creation policies (the latter through reforestation, for example). The contributions of individual developed countries would be based on what their respective GHG emissions represent relative to the total emissions of all developed countries.

This international agreement would allow countries to levy border taxes on products from countries that have not established a carbon price signal in accordance with the international standard. The message would be clear to all large GHG emitters: if you do not levy a carbon price on your products before exporting them, other countries will do it for you – and will keep the resulting revenue. It will be in each country’s interest to comply with the international agreement, to levy a carbon price on its own emissions, and to use the resulting revenue as it sees fit.

In this way, the world would have available an instrument that is vital to its sustainable development. At last, carbon emitters would be required to pay the environmental price for their actions. Consumers and manufacturers would have an incentive to choose lower-carbon-content goods and services and to invest in new energy-saving and emission-reducing technologies.

We must negotiate this harmonised carbon price signal, and we must do it now. What better place to undertake this approach than in Rio, right where the problem of climate change was recognised by the international community 20 years ago?"

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