The Carbon Pricing Leadership Coalition: Fostering Climate Leadership in a Bottom-Up World
Last April, on the margins of the World Bank/International Monetary Fund Spring Meetings in Washington, the Carbon Pricing Leadership Coalition (CPLC) hosted its third successful High-Level Assembly, featuring nearly 80 global leaders taking stock of global progress and advancing carbon pricing as a key climate solution. I was one of the architects behind the CPLC, and have recently moved to a new position to help the International Finance Corporation promote private sector-led development. Departing CPLC put me in reflective mode: how did this unique, impactful initiative come to exist? And can a bottom-up, public-private initiative, provide lessons to those seeking new models to tackle other global challenges?
The 2014 Climate Action Summit sets the stage
To understand how the CPLC got to this point, let’s travel back to 2014, when United Nations Secretary-General Ban Ki Moon was planning a Climate Action Summit to catalyze leadership and political support for a new global climate agreement in 2015. I saw the Summit as a critical turning point in the climate movement, because it clearly recognized that “non-state” actors – companies, investors, cities and civil society organizations – have an essential role to play in delivering solutions. Before the Summit and for 2 decades, the focus had been almost exclusively on lobbying governments to negotiate multilateral solutions without significant progress. In my opinion, this was not the right approach: climate change is at its heart an economic challenge. Nearly every sector and business must shift to a more efficient, low-carbon model, with important impacts on jobs, communities and livelihoods. As a result, climate policy solutions cannot be negotiated by environment ministers alone. Instead, we need to engage all actors in the economy to step up and support the transition to a climate-stable future.
The Summit aimed to encourage pledges and commitments to accelerate solutions like clean energy, sustainable cities, and reducing deforestation. We at the World Bank Group were strong advocates that there was also a need to galvanize support for a key cross-cutting economic incentive: putting a price on carbon. The World Bank – through its Partnership for Market Readiness effort – had seen an increase interest by government in using carbon pricing. At the same time, the most recent round of corporate environmental disclosures from CDP showed a clear upward trend in the number of companies using an internal carbon price to guide their investment decisions. Interestingly, companies said that they were using carbon pricing to prepare for more stringent government climate policies.
This led us to develop a simple idea for the Summit: enlist major businesses and governments to align with a statement supporting more ambition to price carbon pollution. Importantly, it was a joint statement that committed governments and business to work with one another to find solutions. We mobilized our networks, working through World Bank country engagement teams and with strategic partners like the We Mean Business Coalition and the UN Global Compact. With team effort, we exceeded all expectations: at the Climate Summit, World Bank Group President Jim Kim announced that 73 countries and over 1,000 global businesses and investors had aligned with the statement.
From a movement to a leadership coalition
The momentum behind carbon pricing accelerated after the Climate Summit. Companies, investors and governments began to ask how they could catalyze more global policy action. While over 60 governments were pricing carbon in some way, there was no guidance on how to address key issues like the use of revenues, competitiveness, and aligning pricing with other policies. To address this, together with the International Monetary Foundation and the OECD, The World Bank Group published the FASTER principles for successful carbon pricing.
But this was not enough. Each country faced its own unique political challenges, and there was a need for a safe space for informed dialogues among trusted partners. To address this gap, we launched the Carbon Pricing Leadership Coalition at COP21 in Paris with over 100 partners committing to accelerate the uptake of well-designed carbon pricing policies. In April 2016, the first CPLC High-Level Assembly included CEOs, finance and environment ministers and civil society leaders agreeing to a work-plan to deliver the ambitious goal to double the percentage of GHG pollutants covered by pricing by 2020, and to double this again in the next decade.
With financial support from the Dutch government and the Children’s Investment Fund Foundation, the CPLC Secretariat was set up at the World Bank Group. The Workplan focused on fostering government leadership, building and sharing the evidence base, and mobilizing business support. Partners were encouraged to host dialogues, to reach out to skeptics, to advocate for smart policy, and to contribute research and analysis. Regular calls and meetings fostered a shared spirit of volunteerism, trust and creativity. This year’s CPLC Leadership Report demonstrates that this sort of light-touch, leadership platform can make a real difference. It summarizes notable carbon pricing progress in the last 3 years, including:
China’s 2017 launch of a national emissions trading system
Adoption of carbon taxes in Colombia, Chile, South Africa and Singapore
Commitments by over 1,400 global businesses to use internal carbon pricing
The announcement by the Canadian and French governments of a minimum carbon price ‘floor’
The December 2017 One Planet Summit launch by Chile, Mexico, Colombia, Canada, California and other governments of the Carbon Pricing in the Americas framework, which seeks to improve regional cooperation
Thanks to these and other announcements, we are on track to exceed the first CPLC goal of doubling the share of global emissions covered by carbon pricing before 2020.
Moving forward: the role of the private sector in deepening, broadening and linking carbon pricing policy
Despite this progress, we are not there yet. The World Bank’s most recent analysis shows that only 15% of greenhouse-gas pollution is priced; the average price level is less than $10/ton of CO2. We need to follow Canada and France’s lead and deepen carbon pricing levels, while expanding the number of governments and companies that use carbon pricing, and linking systems like the governments of Ontario, Quebec and California.
The CPLC was created out of the insight that companies are actively planning for higher costs of carbon. We need to continue to foster private sector leadership to drive more ambitious government policy. More companies are accepting this role. In April, over 20 major Canadian companies published a report outlining the business case for supporting well-designed carbon pricing policy. Emerging market businesses are also showing governments the path forward: over 100 companies are participating in innovative emissions trading simulation exercises in Mexico, Brazil and India. These efforts are helping companies to manage their emissions efficiently – and sending an important signal to governments that companies want improved carbon pricing policies. Finally, groups of companies are organizing cross-sectoral partnerships. Companies along the construction value chain are looking at the best way to use carbon pricing to drive low-carbon innovation; and banks are using internal carbon pricing as a strategy to manage climate risk.
Lessons learned: managing successful coalitions for climate action
What are the lessons learned in creating and managing successful multilateral coalitions coming from the CPLC experience? There are a few essential ingredients:
Ensure bottom-up ownership key. We spoke with stakeholders as we created the coalition, and built the governance to be flexible, so that they could use the platform to propose ideas and initiatives that aligned with their missions and business plans. We encouraged them to be champions for specific solutions and activities. This created a strong sense of ownership, and then Partners were able to bring others along to join them in advancing specific tasks.
Treat business, government and civil society as equals. An important element of the CPLC’s success and momentum from the start was the equal status of public, private and civil society Partners in the Coalition. This made the CPLC unique, as most other multilateral initiatives are run by governments, and while they may invite the private sector to participate, it is often focused on limited input and review of output generated by governments. We reversed that, and had all content and outreach as co-created by all CPLC Partners
Engage leaders to push ambition. The third word in the CPLC name is “leadership” – a critical part of the Coalition was the high-level events that brought together heads of state, finance ministers, CEOs and heads of international organizations at key moments – such as the event COP21 where World Bank Group President Kim took the stage with 7 heads of state to champion carbon pricing. The Coalition also worked to synthesize complex analysis and policy work for these leaders, which helped them to take action.
Anchor the initiative. Finally, the decision was made to house the CPLC Secretariat at the World Bank Group, which has its own convening power, analytical rigor, and public/private (through the International Finance Corporation) client base that is ripe for engagement. This allowed the initiative to have a broader reach and to hit the ground running after the launch. Often coalitions rotate from government to government, or struggle to find long-term homes and/or funding. This was an important element of the CPLC’s success.