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Businesses rally behind global carbon pricing strategy

Global business groups have banded together to push for an international carbon price strategy, calling on governments at the COP26 climate summit to agree on an “effective and fair” system to spur investment in cutting greenhouse gas emissions.

The drive for a common approach comes from the Washington-based Business Roundtable (BRT), the leading lobbyist for big companies in the US, the Brussels-based European Round Table for Industry (ERT), and the business councils of Australia, Canada and Mexico.

It demonstrates the growing pressure on executives for stronger action on climate change as well as their concerns about the potential costs of complying with a patchwork of local policies.

The global business lobby co-ordination on carbon pricing coincides with the OECD attempts to rally countries behind a plan for a voluntary framework on how best to price both carbon taxes and other forms of environmental regulation.

However, the business group’s seven-point “call to action”, to be launched across three continents on Thursday, appears to go further than the OECD approach.

The businesses argue for convergence on carbon pricing across regions and sectors. “A consistent price on carbon would incentivise everyone — energy producers, industry, consumers, investors and financial markets — to transition towards low-carbon technologies and activities,” said Dimitri Papalexopoulos, chief executive of Titan Cement and chair of the ERT’s energy transition and climate change committee.

“We believe a price on carbon remains the most important consideration because that encourages innovation,” said George Oliver, the Johnson Controls chief executive who chairs the BRT’s energy and environment committee.

He couched the support for a carbon pricing regime with a plea for a “level playing field”, however, adding: “We do believe that carbon pricing could damage a country’s competitiveness if not done well . . . The devil’s in the detail.” 

Carbon pricing programmes typically take the form of taxes on polluters’ emissions or “cap and trade” systems that limit how much companies can emit before having to pay more.

The World Bank outlines 64 such initiatives in 45 countries, although they cover less than 22 per cent of global emissions and most use carbon prices that are too low to incentivise heavy emitters to change their business models.

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Carbon pricing has risen up policymakers’ agenda this year. The G20 finance ministers agreed for the first time in July that it was one of the measures that countries could use to fund the shift in their economies necessary to meet net zero greenhouse gas emissions targets by 2050.

It remains uncertain whether negotiations at the upcoming COP26 UN climate summit will get an agreement to set a floor price for carbon emissions. Many governments have long feared that imposing carbon taxes will prompt a backlash from voters and the corporate sector.

Some countries, such as the US, China and India, see a carbon price that is high enough to limit temperature increases to the Paris accord upper target of no more than 2C from pre-industrial times, and ideally 1.5C, as a step too far, and prefer domestic initiatives.

The EU, meanwhile, has taken a more aggressive approach. It is extending its own carbon pricing scheme to new sectors within the bloc and has promised to impose a carbon border tax on imported goods.

The BRT has not backed any one carbon pricing proposal, but has expressed support for a market-based strategy that includes a price on carbon where it deems it feasible and effective.

The ERT argues that an “effective” policy must incentivise carbon emission cuts across an industry’s entire value chain. It also wants carbon costs to be gradually integrated into the price of products and services and to be based on reliable carbon accounting and green labelling standards.


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