What is carbon pricing and what can it do to lessen the impact of greenhouse gas?
“Carbon pricing is an instrument that captures the external costs of greenhouse gas (GHG) emissions—the costs of emissions that the public pays for, such as damage to crops, health care costs from heat waves and droughts, and loss of property from flooding and sea level rise—and ties them to their sources through a price, usually in the form of a price on the carbon dioxide (CO2) emitted.”
Carbon pricing places the blame on those companies and organizations who are directly responsible and who can, in effect, avert it. This provides the responsible parties the ability to think about whether, or not, they want to act. Carbon pricing is the least costly and most flexible way to move forward in this regard. When a price point is set we can start creating economic incentives for cleaner technological development. Revenues derived from carbon pricing could, in turn, be used to further funding for climate technology and innovation.
Carbon pricing itself is not the only method of achieving a balance between business and environment with regard to carbon production and mitigation. Emissions trading is another viable alternative.
Emissions trading systems might also help establish carbon pricing levels. Emissions trading would be based on each ton of greenhouse gas they emit. Each ton would equal one allowance. The Feds could limit the number of allowances they permit overall, making them more valuable. Allowances could be bought, traded, and sold. This would establish a fair market price for carbon and drive economic growth by incentivizing those who participate.
Several emissions trading programs have been put forth at the national, subnational, and regional levels. China and Germany recently launched substantial pricing initiatives along with Canada and the EU. However, their plans only account for about one fifth of the world carbon emissions and come with a lowly price tag of only $3 per ton. Most, on the inside of this dilemma, say the price needs to be upwards of $75 per ton to produce any meaningful results.
Businesses and government are talking about working in concert toward transitioning to a carbonless economy. If history has anything to do with our future we know that talk does not always bear fruit for action.
On the government side of the fence, carbon pricing is part and parcel of climate policy that is required to effectively draw down emissions and generate revenue. Businesses need to put thought into this possibility too. They should explore the impact of mandatory carbon pricing on their business operations. Take the data they find and use it to identify any potential climate risks then select opportunities to drive revenue and growth in their various sectors. Investment banks will, if they have not already, begin to anticipate the potential influence that climate policies might have on their investment portfolios and pour funding into climate resilient companies if the moment looks ripe for ROI (return on investment).
Whatever strategy is implemented should contain supporting measures to enhance adoption and increase effectiveness. Regulations and fees or rebates will place downward pressure for more business execution, but would, likely, constitute less impact on carbon pricing. People might be disinclined to drive less because we are already so dependent on this, but implementing the other measures provides the reasonable assumption to sell this politically and avert increasing fuel prices in the process.
If carbon pricing revenues can meter the deficiencies between stimulating the economy and driving economic harm that could help gin up support. Public and private backing is a must in this process because neither can wholly bear the impetus of creating networks for green technology infrastructure.