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Global climate goal could be in peril without carbon price reform

According to managers representing $10.6 trillion in investments, without a global review of carbon prices, climate goals could be compromised. Currently, less than 25% of global emissions are covered by carbon credits, and their price varies widely across regions, and is generally relatively low to effectively influence change. In a document released ahead of the G7 Leaders Summit in Berlin (26-28 June 2022), attended by Ministers of the Environment along with Ministers of Climate and Energy, the Net-Zero Asset Owner Alliance (NZAOA) established five principles to underpin a redesign of government policies and encourage a shift away from high-emissions activities. Are they:

  1. Ensure adequate coverage and ambition: more policymakers should consider implementing carbon pricing that are legally binding and aligned with scientific evidence

  2. Deliver a just transition: policymakers must design carbon pricing instruments to reduce or compensate communities and sectors impacted by carbon markets

  3. Predictability of the carbon price: that the trajectory of carbon prices allows for a planned and orderly transition to a low carbon economy. Carbon taxes are expected to increase but in a predictable way. Likewise, the Emission Trading System (ETS) should be designed to include market stability measures, including price floors, ceilings or bands, to avoid excessive volatility and provide long-term predictability of carbon prices.

  4. Minimize competitive distortions: Carbon pricing policies should be designed to prevent leakage*, implementing appropriate protection measures and targeting emissions-intensive companies exposed to trade. Also carbon border adjustment mechanisms (CBAMs) to minimise competitive distortions.

  5. Promote international cooperation: including the creation of international "climate clubs" where members work together to encourage robust carbon prices

* Leakage: moving a production process to a jurisdiction with no carbon pricing (or a lower carbon price) to reduce your carbon costs

Click below to access the publication "NZAOA Position Paper on Governmental Carbon Pricing".



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 CARBON CREDIT MARKETS

“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.”

“I am among those who think that science has great beauty”

Madame Marie Curie (1867 - 1934) Chemist & physicist. French, born Polish.

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