Delivering on the Paris Agreement: Is there a Carbon Pricing Opportunity for India?

Negotiators in Paris last December achieved a previously unattainable consensus among all countries — large and small, industrialized and developing — on a target for minimizing climate change.
 
They agreed to hold planetary warming to below 2 degrees Celsius, which can only happen by drastically cutting the greenhouse gas emissions that cause climate change.
 
Adhering to the target requires a de facto energy revolution that transforms economies and societies by weaning the world from dependence on fossil fuels. The magnitude of the task means strategies and spending on a scale far exceeding previous efforts. 

More than 180 countries submitted national plans that now must be turned into investment blueprints.
 
A lot of future investment is at stake. From now through 2030, the global economy will require $89 trillion in infrastructure investment across cities, energy and land-use systems as well as $4.1 trillion in incremental investments for the essential low-carbon growth plan.
 
Such need dwarfs available public funding, making the private sector a vital participant, along with innovation to help spur and leverage increased investment.
 
At the recent Investor Summit on Climate Risks in New York, U.N. Secretary-General Ban Ki-moon called on pension funds, the banking sector, the insurance industry and others to at least double their clean energy investments by 2020.
 
More and more, economists and business leaders believe the only way to forge solutions at the necessary scale is to put a price on carbon emissions to make polluting an operating cost factored into bottom-line calculations.
 
If emissions become an economic decision, they argue, the private sector will have the fiscal incentive to embrace the necessary global transformation to a zero-carbon future.
 
What is the carbon pricing opportunity for Indian business?
 
A rapidly growing number of global companies are committing to use carbon pricing as a way to “climate proof” their business models for an increasingly low-carbon future. Businesses also are working with governments to help pilot emissions trading, offering lessons learned to ensure efficient system design. 
 
For India, there is a clear opportunity here. Under the national plan India submitted to the United Nations, the government set a target to increase renewable energy capacity from 30 percent today to 40 percent by 2030. The plan also calls for installing 175 gigawatts of renewable energy capacity by 2022 — an ambitious goal considering the world’s total installed solar power capacity was 181 gigawatts in 2014. The government estimates that $2.5 trillion in investment will be needed to achieve its plan by 2030.
 
Major Indian companies — including Dalmia Cement, Mahindra Group and Tata Group — have stepped up to become sustainability champions by taking action to support carbon pricing.
 
These and other Indian companies are partners of the Carbon Pricing Leadership Coalition, a new initiative designed to support successful carbon pricing across the globe.
 
This week, Indian business leaders will gather in Delhi and Mumbai at the Indian Climate Policy and Business Conclave organized by the Federation of Indian Chambers of Commerce and Industry (FICCI) in partnership with the Indian Ministry of Environment, Forest & Climate Change, the German Federal Ministry for the Environment, and the World Bank Group.
 
In discussion groups and training sessions, they will examine the issues and opportunities facing India in confronting the changing climate, and explore how to advance carbon pricing in their internal business models. They will learn at what levels they can set a carbon price internally, and how to apply it so that it helps to accelerate their transition to a lower-carbon footprint.
 
Carbon pricing is not always an easy policy to implement. Each jurisdiction and company faces its own challenges, with fears that a carbon price will affect competitiveness or raise energy costs.
 
But experience through years of study, testing and trial and error shows carbon pricing can work, bringing both reduced emissions and economic growth. We know that because of leaders like California, the European Union, Korea, China and Mexico that are successfully running carbon pricing programs today.  They have navigated concerns about competitiveness, fairness and supporting training and job transition through stakeholder engagement, smart policy design and regular reassessments of progress—building a set of principles for good practice that India can borrow from as it tries to unlock the private investment needed to transform its economy.  

Vestas Wind Systems A/S Joins Carbon Pricing Leadership Coalition

Vestas Wind Systems A/S has joined the Carbon Pricing Leadership Coalition, which brings together twenty-one governments and more than 90 leading businesses and strategic partners to catalyze action on carbon pricing and drive investment for a cleaner future.

“We at Vestas want to promote pricing power in a way that reflects its true  benefits and costs, including CO2 emissions, as a critical starting point towards reducing the energy sector carbon emissions.” - Morten Dyrholm, Vice President, Global Marketing and Public Affairs

Read more about why Vestas Wind Systems A/S supports carbon pricing:

Credit: rechargenews.com  
(Printed in Recharge first)

 

Official Launch of the Carbon Pricing Leadership Coalition: a Major Success at COP21

 Carbon Pricing Leadership Coalition Official Launch and Work Plan Report

• The Carbon Pricing Leadership Coalition (CPLC) was officially launched on November 30, 2015, on the opening day of COP21.

• The Coalition brings together governments, businesses and NGOs who all agree and advocate that carbon pollution should be priced fairly, effectively and efficiently.

• The World Bank Group President, Jim Yong Kim, highlighted the fact that pricing carbon pollution is imperative if we are to address climate change, end poverty, and further sustainable development.

An important piece needed to solve the “climate puzzle” was put in place during the first day of the Paris climate talks: the successful launch of the Carbon Pricing Leadership Coalition (CPLC), with the enthusiastic support of 21 governments and more than 90 businesses and strategic civil society partners.

The goal of the initiative is to advance effective carbon pollution pricing systems and expand their use globally, helping countries to maintain competitiveness, create jobs, encourage innovation, and achieve meaningful emissions reductions.

These interlinked goals, and the actions planned to achieve them, are the foundations of the CPLC Work Plan, which was formally adopted during the Launch Meeting.

Carbon pricing is gaining momentum, but faster actions are needed.

The momentum to take action and price carbon pollution is clearly growing. Since 2012, the number of implemented or scheduled carbon pricing instruments has nearly doubled. Today, those which have been implemented have an aggregate market value of about US$50 billion. Right now, approximately 40 countries and 23 cities around the world are using carbon pollution pricing schemes. These represent about 7 billion tons of carbon dioxide, or roughly 12% of global greenhouse emissions, a threefold increase over the last decade.

While these numbers are encouraging, unfortunately they’re not enough to shift the current climate projections or to set the world on the 2-degree-Celsius development pathway needed to avoid the most devastating impacts of climate change. The majority of emissions (85 percent) are priced at less than US$10 per ton of CO2. That does not meet the price that economic models tell us is needed in order to reach the climate stabilization goals recommended by scientists.

Addressing this issue during his opening remarks at the CPLC launch event, the World Bank Group President, Jim Yong Kim, urged the members of the Coalition to boost their efforts and promote further actions:

“We need more governments and more businesses to act and put a price on carbon pollution now. Action must accelerate significantly for the world to meet international climate goals.”

The partner representative from the government of Ethiopia expressed agreement with President Kim, who highlighted the links between addressing climate change, ending poverty, and furthering sustainable development. Dr. Kim spoke of the pressing need to take simultaneous actions to take on poverty and climate change, and clearly affirmed that pricing carbon pollution is a key factor if we are to successfully meet this enormous challenge. CPLC government partners at the national and sub-national level highlighted key actions they are taking and commitments to work with the CPLC to support successful carbon pricing.

The private sector commitment

Today, over 400 businesses worldwide are using an internal carbon pollution pricing system to guide their investments.

The CPLC launch provided an ideal opportunity to showcase and present some of the best examples of carbon pricing leadership from global businesses willing to share and advance their best practices.

Representatives from Engie, Royal DSM and Total offered to help take the lead in mobilizing business support. Engie CEO Gérard Mestrallet highlighted how an internal carbon price has driven change within Engie’s business model, as well as its decision to discontinue investments in coal-fired generation going forward.

Feike Sijbesma, CEO of Royal DSM, committed to maintain a robust internal carbon price, currently at €50/ton of CO2, when reviewing investment decisions, and pledged to help mobilize business support to help governments implement effective carbon pricing policies. In addition, the Total Senior Vice-President for Sustainable Development & Environment, Jerome Schmitt, highlighted the importance of oil and gas companies taking a leading role in carbon pricing through the ‘Paying for Carbon’ initiative and pledged to work through the CPLC to mobilize the business world and advance leadership dialogues.

Moving Forward

The transition to a cleaner future requires government action and the right incentives for private sector partners. Carbon pricing is key to cutting pollution and driving investment in a low carbon future. The CPLC is ready to work jurisdiction by jurisdiction, unpacking each government’s unique policy challenges and helping them find solutions. To support this mission, several partners around the world have offered to host these discussions and thus maintain international momentum for carbon pricing among both governments and the private sector. The Inaugural Carbon Pricing Leadership Coalition High-Level Assembly will take place in 2016 and will welcome new Partners, assess global updates on the state and trends of carbon pricing around the world, and identify opportunities to drive the global carbon pricing agenda forward from Paris.

Find more information and the official CPLC Official Event and Work Plan report here.

Carbon Pricing At Center Stage in Climate Negotiations

Top 10 Carbon Pricing Stories from Paris

On December 12, international negotiators representing 195 countries adopted The Paris Agreement to combat climate change. Among the key provisions of the Agreement was a new mechanism to ensure that carbon emissions reductions are “real, measurable and long-term” - a provision that gives investors and the private sector a strong signal to begin to shift their portfolios toward lower-carbon assets.  The Agreement also paves the way toward enacting successful carbon pricing and carbon market regimes.

While most leading climate scientists, economists, and policy experts have long been in agreement on the need for some form of carbon price, the Paris climate summit saw a dramatic uptick in discussions of carbon pricing, at the highest levels of business and government. At dozens of side events and media briefings, government leaders, from Presidents and Prime Ministers to finance and environment chiefs, called for a carbon price as a necessary tool in decarbonizing entire economies, and establishing international standards for carbon reductions.

At the same time, business leaders from around the globe - including oil and gas executives - pushed a carbon price as the most efficient mechanism for the private sector to squeeze carbon out of their operations and supply chains.

Leading the charge were the members of the Carbon Pricing Leadership Coalition, a self-selecting group of leading governments, companies and civil society organizations convened by the World Bank Group who are embracing carbon pricing as an efficient and effective means of slashing emissions across enterprises and entire economies.

The support and momentum for carbon pricing was picked up throughout the Paris negotiations. Following is one take on the “Top Ten” carbon pricing stories out of Paris:

1. World Leaders Call For Price On CO2 Emissions (International Business Times):  Six heads of state leaders and major global economic actors are urging diplomats gathering in Paris to adopt a price on carbon dioxide emissions. “We’ve come together in the shadow of an undeniable truth: We simply cannot afford to continue polluting the planet at the current pace,” Jim Yong Kim, President of World Bank Group.

2. A Growing Push to Price Carbon (New York Times): Should there be a global price on carbon? Many countries say yes. About 40 countries and 23 regions, states and cities, representing about 12 percent of global greenhouse gas emissions, have mechanisms to put a price on carbon.

3. The best is the enemy of the green (The Economist):  Carbon prices tackle the problem of emissions head on. When people engage in a carbon-intensive activity, such as driving a car, they impose a cost on others, often without even realising it: the emissions produced when petrol is burned contribute to global warming. Because that cost is not built into the price of petrol, people buy more of it than they otherwise would, atmospheric carbon goes up, and the world bakes. A carbon price that added the missing cost to the price of petrol (and coal and every other carbon-generating activity) would give people an incentive to emit less.

4. Corporate Managers Back Carbon-Pricing Mechanisms, Survey Says (Wall Street Journal): Putting a price on carbon emissions is the fastest way to push companies to become more environmentally friendly, corporate executives say. More than eight in ten chief executives want international leaders to provide a clear roadmap and timeline on future carbon pricing mechanisms at United Nations climate negotiations in Paris next month, according to a survey of 75 chief executives by the UN Global Compact and Accenture Strategy.

5. Obama Calls Carbon Price Better Than Regulations (Scientific American): “I have long believed that the most elegant way to drive innovation and to reduce carbon emissions is to put a price on it,” President Obama said yesterday in a press conference in Paris. He echoed economists who describe greenhouse gas emissions as “externalities”—things of value that aren’t correctly priced by the market. The economic impact of carbon emissions on sea-level rise, for example, isn’t counted in the price of gasoline.

6. What is carbon pricing and why is it so important in battling climate change? (Los Angeles Times): Advocates argue that the adoption of carbon pricing will provide an incentive for companies to reduce their greenhouse gas emissions and encourage the production of carbon-free technologies. Longer term, it would make a coal-fired power plant less competitive relative to wind turbines or carbon-free sources of electricity. Also, if the cost of petroleum rises, vehicles that rely on electrical power will become more competitive and desirable. The domino effect is potentially huge.

7. Signal and Noise at the Paris Climate Summit (New Yorker): … Perhaps the only marketplace signals that would be strong enough to catalyze that level of investment would be eliminating oil and gas subsidies and implementing penalties on CO2 pollution. “We won’t see a significant shift away from fossil fuels in the energy industry until an honest price is imposed on carbon-dioxide emissions,” Marie-José Nadeau, the chair of the World Energy Council, said.

8. Prime Minister Hailemariam Emphasizes the Importance of Carbon Pricing (Geeska Afrika Online):  At a high-level panel organized on the sidelines of the Climate Summit in Paris, Ethiopian Prime Minister Hailemariam emphasized that he was promoting carbon pricing because of its interest in seeing climate change properly addressed since it is suffering from climate change and its impacts.

9. How finance ministers could fall in love with carbon pricing (Potsdam Institute): “Finance ministers are facing strong demand for public investments in education, security or transport – pricing CO2 turns out to be a suitable means of raising the revenues that are needed,” says Max Franks from the Potsdam Institute for Climate Impact Research.

10. Elon Musk calls for carbon price to halve the transition time to clean energy (Guardian): Elon Musk, one of the world’s greatest innovators, says the key to tackling climate change and driving clean energy innovation is a carbon price very similar to the one Australia abolished

Shifting the carbon pricing debate: Business attitudes revealed in context of COP21

In an effort to better understand the business perspectives on climate action, and given EY’s participation to the Carbon Pricing Leadership Coalition, EY is releasing a study on current business attitudes toward carbon pricing. This global survey of more than 100 executives shows that consensus is building around the idea of carbon pricing and that companies are increasingly open to taking independent carbon pricing action, expecting it may actually improve overall performance.

Shifting the carbon pricing debate:
Emerging business attitudes fuel momentum for global climate action

The survey results indicate that 48% of respondents say their company is in favor of carbon pricing, with just 7% saying that they are against it. Looking at the findings regionally, 64% in Europe and 59% in emerging markets are in favor of carbon pricing, compared to the US where just 18% of companies were in favor. Strikingly, 78% of respondents say that that carbon pricing would have a strong positive impact on fostering innovation, triggering initiatives that are beneficial to performance and not just compliance, and 50% believe that carbon pricing will have a positive impact on their overall competitiveness.

EY wishes to thank the following individuals and organizations for their consideration and input during the preparation of this report:

Jose Manuel Entrecanales Domecq, CEO
Acciona

Gérard Mestrallet, CEO
Engie

Jean-Pierre Clamadieu, CEO
Solvay

Lila Karbassi and Jayoung Park
UN Global Compact

James Close
World Bank Group

For more information, visit: http://www.ey.com/GL/en/Services/Specialty-Services/Climate-Change-and-Sustainability-Services/ey-shifting-the-carbon-pricing-debate

Carbon Pricing Leadership Coalition: 1st Major Success at COP21

On the first day of the COP21, there was an unprecedented step forward on one of the toughest issues facing negotiators. The Carbon Pricing Leadership Coalition is now part of the global policy-making environment. The Coalition includes governments, intergovernmental agencies, businesses and nonprofits, who all agree the world needs to be pricing carbon fairly, effectively and efficiently, as soon as possible.

In a crucial step forward, Canada joined the CPLC, and took the opportunity to highlight the four provinces already putting their own price on carbon, either through a revenue-neutral carbon tax or an ETS. The Vice President of the oil company Total said all viable options should be deployed, whereever possible, whether they are aligned or not, linked or not. In other words, we do not need a global regime to achieve carbon pricing around the world.

Some history

A few years ago, an idea began to circulate within the climate team at the World Bank: for the world’s most powerful development bank to achieve its two core missions—motivating sustainable economic prosperity and ending poverty—the world would need to align economic policy with climate responsibility by deploying carbon pricing policies that keep everyone honest and make our economy work for our future, not against it.

In the summer of 2014, that team began building support for an open statement calling for a price on carbon. It would be introduced at the UN Secretary General’s Climate Summit, on September 23, 2014. By the time it was released, it had the support of more than 70 national and subnational governments, and more than 1,000 corporations, including major oil companies. The list of supporters accounted for 52% of global GDP.

  
Since late 2014, that list of signatories, which included many non-governmental organizations, began to come together to talk about how to work for deployment of smart carbon pricing strategies. Throughout 2015, key strategic partners joined meetings where oil companies sat with environmental groups and major national governments, and discussed a way to collaborate going forward.

In September, partners gathered to design the governance structure and work plan for this new coalition. At that meeting, the strategic partners made revisions to a draft governance strategy and supported the standard of all partners being treated as equals at the table. 

Getting there Faster

Shortly after that meeting, the World Bank and the OECD released a report outlining proposed universal principles for successful carbon pricing, designated by the acroynm FASTER, standing for:

• Fairness
• Alignment of policies and objectives
• Stability and predictability
• Transparency
• Efficiency and cost-effectiveness
• Reliability and environmental integrity

The principles were derived from conversations and consultations with a diverse range of partners, including advocates for emissions trading and for carbon taxes, who often disagree, as well as environmental NGOs and oil companies. The FASTER principles aim to show the way for accelerating the deployment of carbon pricing, globally, by letting governments design policies that work best for their circumstances, but that are transparent, effective, and fair.

The big news

Today, at Le Bourget, just outside of Paris, inside the COP21 climate negotiating venue, the Carbon Pricing Leadership Coalition officially launched. It is now a new global institution with the ability to convene meetings, make policy, and suggest solutions to those with the power to implement them. The meeting included the adoption of a work plan.

The agreed mission, among the partners, is to ensure no nation misses the opportunity to add effective, efficient, equitable carbon pricing to its national climate strategy. As the Paris agreement will come into full legal force in 2020, the goal is to add carbon pricing to all national strategies by that time, to ensure the most cost-effective way to implement a true global response to climate disruption.

This means one of the major challenges facing the world now has a major force working in favor of success.

The context

It has been said that “carbon pricing is not on the table in Paris”. That idea comes from a misconception about what the table is made of. Many believe the Paris table is the text of a new climate treaty. In fact, it is four pillars, one of which involves the text of an agreement, and various legal decisions of the 196 nations that have ratified the 1992 UN Framework Convention on Climate Change.

The other three pillars are:

• nationally determined climate action strategies, for each nation;
• financing, through various mechanisms, including the smarter financial sector we are still designing;
• and action platforms for implementation.

The Carbon Pricing Leadership Coalition is one of these action platforms. It will be doing business no matter what happens to the other three pillars.

  
After the CPLC launch, Rachel Kyte—the World Bank Vice President and Special Envoy for Climate—moderated a Heads of State Media Event on Carbon Pricing. Joining Rachel were Prime Minister Justin Trudeau of Canada, President Enrique Peña Nieto of Mexico, Chancellor Angela Merkel of Germany, President Michelle Bachelet of Chile, and Prime Minister Hailemariam Desalegn of Ethiopia, as well as World Bank President Jim Yong Kim and Ángel Gurría, the Secretary General of the OECD.
The event was a vocal and diverse endorsement of carbon pricing as the most effective, efficient, and catalytic policy choice for motivating a rapid transition to a clean-energy economy.

What this all means

The Carbon Pricing Leadership Coalition is a breakthrough for inclusive global policy-making. NGOs that want to eliminate carbon emissions will join major oil producing countries and companies, in a dialogue of equals, at a table convened by a major international institution, to negotiate a smart transition.

Now, the work begins.

For more news from the Citizens' Climate Lobby visit http://citizensclimatenetwork.org/

Paris will deliver on carbon pricing

Paris is not just about the governments negotiating: it’s a movement towards a decarbonized world, and COP21 has been an important global moment to focus us on expedient, efficient and effective means to reduce carbon.

What is different about COP21 that is different from other meetings is that it has brought to the table the voices of citizens, businesses, investors and sub-national governments who are demanding action, often underscoring how carbon pricing is an important lever for effectively cutting emissions.

Now is the time when governments must decide to get on board to make things easy, or if they will slow down this momentum. Accepting that carbon pricing is an effective policy instrument that countries can employ as they focus on implementing their climate pledges here in Paris sends clear, signals to the private sector that they should continue and expand investment energy efficiency and renewable technology projects.

1. Governments are preparing

While COP21 is not expected to produce a single, global carbon price, the negotiations themselves are spurring action on the issue. Countries have come to Paris with solutions.  More than half of the INDCs made prior to COP21 point to market mechanisms, such as a carbon price, as an important tool for reducing emissions. 

Currently 40 nations and 23 regional or local jurisdictions already have carbon pricing - including Mexico, India, the European Union and California – and many more are expected to emerge. China’s impending national cap-and-trade program, announced in September, means that other nations have fewer excuses for inaction.  China’s pledge has been the capstone of a series of commitments by nations, cities, companies and investors in the run-up to Paris.

2. Business and Investors are Increasing support

Global investment in clean energy increased to $270bn last year ($89bn from China and $51bn from the US) and was the first significant increase in three years even as the cost of renewable energy declined.

And here at COP21, we are starting to see that carbon pricing is the new norm, and we are seeing the early stages of fund mobilization through developments like the Breakthrough Energy Coalition, where high-profile business leaders have pledged to channel billions into clean energy innovation.

But much more investment is needed, and businesses are ready to commit if our policy leaders are ready to commit.

Businesses are asking policymakers to make carbon pricing a priority, with over 1,000 disclosing to CDP that they already place a price on carbon or plan to do so within two years.  They are also giving serious consideration to the level of price needed to drive the transformation to a low-carbon economy. 

Unilever said that a price of $15 or even $30 per tonne would not likely make a material difference to GHG emissions.  At a gathering of oil and gas companies yesterday, we heard that a price of at least $40 would be needed to trigger the shift from coal to gas-powered electricity. And at $125 per tonne, Acciona believes wind production could double.

3. Paris will deliver on carbon pricing

The Paris Summit has provided a stage for world governments, businesses, and investors to set the course for a future, low-carbon economy.The rising attractiveness of clean energy, an essential ingredient in that economic transition, will be an inevitable consequence of a commitment to price the act of emitting greenhouse gases. Paris will amplify the message that the world is moving toward meaningful and rising carbon prices, giving its supporters the certitude they need to shift to low-carbon energy and become leaders in combatting climate change.

The era of cost-less carbon emissions is over. 

New Guide to Help Your Company Put a Price on Carbon

Yesterday at a special event on the margins of COP21, Heads of State put the spotlight on carbon pricing as a necessary and effective measure to tackle the climate change challenge.  Together with a global agreement, a sufficient price for carbon will help create the necessary rules and market signals to limit warming to 2oC.

Already, more than 1,000 companies report that they are pricing carbon internally now, or will be by 2017.  We want all of them – and even more companies – to join the Carbon Pricing Leadership Coalition and align with the Business Leadership Criteria on Carbon Pricing led by the UN Global Compact together with UNEP, the UNFCCC secretariat and Caring for Climate partners.

To help companies put their carbon pricing commitments into action, yesterday the UN Global Compact and World Resources Institute, together with Caring for Climate partners, released the Executive Guide to Carbon Pricing Leadership.  The guide, which features insights from more than 100 companies from around the world, is designed for individuals who are now completing due diligence on carbon pricing of behalf of their companies.  

Through interviewing more than 15 companies, surveying nearly 100 and gathering input during an open consultation period this fall, the partners found that the top 5 reasons companies price carbon include:

1. Preparing for policies affecting the company’s operations or value chain;

2. Seeking to achieve ambitious GHG goals, such as science-based GHG targets;

3. Translating climate change into financial terms;

4. Responding to investor and customer demands; and

5. Learning, testing and showcasing effective carbon pricing approaches.

Practically, the research uncovered that companies tend to take one of three distinct approaches to price carbon: internal carbon taxes, fees or trading systems; shadow pricing; or implicit pricing. The guide outlines what each of these approaches means and features company case examples illustrating how businesses have put them into practice.

The guide also highlights the benefits and challenges companies face when they price carbon. Companies say the top benefit is that carbon pricing helps them to “translate carbon into business-relevant terms and engage internally.” At the same time, businesses most frequently citied “lack of common method or guidance to set a carbon price” as their biggest challenge – something this guide seeks to address.

As companies look to show climate leadership beyond COP21, being a carbon pricing champion presents clear opportunities. Leadership means calling for effective policy, including by urging governments to help create clarity for future planning or by engaging responsibly in policy dialogues through coalitions and trade groups.

For more information about how your company can put a price on carbon, download the Executive Guide to Carbon Pricing Leadership: A Caring for Climate Report.