Jun 1, 2020 - Energy & Environment

Carbon pricing is growing globally, but still faces headwinds in the U.S.

Reproduced from World Bank Group; Chart: Axios Visuals
Reproduced from World Bank Group; Chart: Axios Visuals

Carbon pricing via taxes and emissions trading systems are growing worldwide but confront a mix of old and new problems, a new World Bank report shows.

Driving the news: The share of global greenhouse gas emissions covered by some kind of pricing system is slated to reach an estimated 22% next year.

  • There are 61 initiatives in place or scheduled to kick in, the bank said in the report that tallies a suite of national and regional policies.
  • The report sees a bump in the share of emissions covered coming in large part from planned launch of China's national system.

Why it matters: Pricing is a favored tool among many climate advocates (and economists in particular) and multinational groups.

  • But the annual study notes that the coronavirus pandemic is creating headwinds. Some jurisdictions are delaying plans to strengthen their system and extending compliance deadlines, the report notes.
  • The pandemic is also causing problems for the UN-administered emissions system for airlines.
  • There's "increased uncertainty for the demand for international credits with airlines questioning the impact of COVID-19 on their offsetting obligations."

The big picture: Prices in most regions "remain substantially lower than those needed to be consistent with the Paris Agreement," the report finds.

  • It cites estimates that prices in the $40–$80 per ton of CO2 (rising to $50–$100 by 2030) are needed.
  • "As of today, less than 5 percent of GHG emissions currently covered by a carbon price are within this range," it notes, with pricing in most areas vastly lower.
  • Worth noting: Pricing systems also raise revenues for climate programs (and other goals) even if they're too low to directly influence industrial and consumer choices.

Yes, but: Despite successes internationally, carbon pricing wasn't getting much love in the U.S. during the earlier days of the Green New Deal debate or the Democratic primary — and it still isn't, Vox reports.

  • But it hasn't disappeared. "[F]or most climate types these days, the attitude toward pricing is: It would be helpful — and if it turns out to be possible, go for it — but it is neither necessary nor central to comprehensive climate policy."
  • It's a huge shift from 2009–2010, when a sweeping cap-and-trade plan was at the heart of Democratic climate legislation that passed the House but collapsed in the Senate.

What we're watching: Joe Biden's climate plan includes a vague nod to carbon pricing, noting "polluters must bear the full cost of the carbon pollution." But that's about all we know so far.

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