BY AMÁLIA SAFATLE
If pricing succeeds in reducing greenhouse gas emissions, making climate conditions safer on Earth and, consequently, increasing the well-being of the population, it should affect virtually every citizen.
The relationship between welfare and fight against climate change is getting clearer and clearer. A recent survey on climate and energy, carried out with 10,000 people in 75 countries, shows that 66% of the citizens see in climate action an opportunity to improve their quality of life. In Brazil, the figure increases to 87%. This is data from the World Wide Views, an initiative that promotes citizen consultation at the global level (you can learn more about the survey here).
You may argue that, on the other hand, pricing carbon will raise costs of living, since increases in prices are extended to consumers and affect mainly low income populations.
But, in fact, pricing aims at discouraging production and consumption of carbon-intensive products, by increasing competitiveness of cleaner and more renewable energies, which also fosters research, development, innovation, creation of jobs and income.
Also, it is worth pointing out that underprivileged people are more vulnerable to environmental problems caused by GHG emissions, paying a high social cost in a diffuse way (you can read more here), while gains from the economic activity used to generate emissions are enjoyed by those who pollute.
In a scenario where carbon-intensive activities are discouraged, some sectors that use a lot of fossil-based energy should be penalized (more here). Therefore, pricing directly affects the oil and gas industry – the sector with the greatest impact on the climate -, as well as the energy sector in countries where coal-fired thermoelectric power plants still have a large market share. The steel, cement, transportation and food (agriculture) industries will also be affected, because they are carbon intensive.
The purpose of pricing is to promote the transition from the old to the new economy, which is cleaner and socially inclusive. Oil companies, for instance, would start to seek greater economic benefits in the exploitation of renewable sources, such as biomass, wind power and solar power.
However, while carbon is not subject to strong pricing policies and exposed to a consistent institutional and regulatory framework, renewable energy sources are not sufficiently attractive and competitive for large investments.
‘Oil and gas industries have strong economic power and therefore great ability to influence this game. At the same time, they combine intelligence and resources to foster change towards a low-carbon energy supply’, says Guarany Osório, Coordinator at GVces Environmental Politics and Economics Program.
According to him, businesses in this sector are aware of pricing trends – they know that this movement will probably occur, although there are uncertainties about when and how. This generates instability that is not favorable to business at all. Those companies would rather work with more well defined scenarios and, more than that, be part of the change process.
For Carlos Rittl, Coordinator of the Climate Observatory, ‘those businesses understand that, the sooner pricing criteria are established, the better for them. And the softer the criteria, the better.’
Besides, they can take advantage of elevated prices in highly pollutant sources, such as coal, to make money with gas exploitation (in spite of being a fossil source, gas is less carbon-intensive than coal). And they can leverage investments in energy efficiency and technologies such as carbon capture and stock.
This report shows how oil and gas companies are getting prepared for the new scenario by internalizing costs related to carbon pricing.
In June 2015, six of those companies – BG Group, BP, Eni, Royal Dutch Shell, Statoil, and Total – announced a ‘call to governments around the world and to the United Nations Framework Convention on Climate Change (UNFCCC) to introduce carbon pricing systems and create clear, ambitious, stable policy frameworks that could eventually connect national systems. These would reduce uncertainty and encourage the most cost-effective ways of reducing carbon emissions widely’ (read more here and here).
Meanwhile, three major American oil companies – Chevron, ExxonMobil and ConocoPhillips – do not support pricing, as published in that article from the Think Progress organization, with a skeptical view on the oil and gas sector positioning.
Good news is that fight against fossil fuels is likely to intensify. The countries that met in Adis-Ababa, in Ethiopia, for the Third International Conference on Financing for Development came to an agreement to finance the new sustainable development agenda after 2015. Nation representatives agreed with many measures to reform global financial practices, among them to eliminate subsidies for the fossil fuel industry.
Rittl, from the Climate Observatory, reminds us that the International Energy Agency recommends 75% of the known oil, coal and gas reserves to remain underground, aligned with the efforts to limit global warming.
Meanwhile, some private business organizations and networks that support pricing gain momentum worldwide. Check out in the table below their key initiatives, objectives, leaders and players involved.
|Carbon Pricing: Initiatives Involving the Private Sector|
|Private Sector Initiatives||Leader||Stakeholders||Objective||Focus|
|Carbon Pricing Leadership Coalition||World Bank (created based on 2014 UN Climate Summit)||Government leaders, businesses (about 50) and civil society||Extend the use of effective carbon pricing policies capable of keeping competitiveness, creating jobs, encouraging innovation, and ensuring significant reduction in emissions||Develop paths that show feasible perspectives, in a range of prices and deadlines. Those paths are being developed to be implemented by governments, businesses and investors|
|Carbon Pricing Champion||UN Global Compact along with UNEP, the UNFCCC Secretariat, and Caring for Climate partners||Businesses and investors||Set an internal price for carbon that is expensive enough to influence investment decisions, in order to reduce greenhouse gas emissions.
Publicly advocate for carbon pricing through mechanisms and policies that take into account specific economies and political contexts of the countries. At the same time, communicate the progress of both criteria mentioned above, by publishing corporate reports
|Businesses will be seen as a reference in carbon pricing, aligned with corporate leadership criteria|
|Carbon Pricing Communique||The Prince of Wale’s Corporate Leaders Group (CLG)||Signed by 155 businesses||Establish carbon pricing as one of the main building blocks for constructing an effective and ambitious climate change policy framework||With this statement, business leaders emphasize the value of strong carbon price as a tool that, if properly designed, can work along with other complementary policies to enable emission reduction in a scale that is proportional to the climate challenge|
|We Mean Business||BSR, CDP, Ceres, The B Team, The Climate Group, CLG, and WBCSD||121 businesses and investors||Offer visibility and strength to current private sector initiatives supporting carbon pricing||Communicate and disseminate positioning and initiatives in the private sector. Gather testimonials from leaders and compile initiatives on the website|
|Coalização Brasil, Clima, Floresta e Agricultura (Brazil, Climate, Forest and Agriculture Coalition)||CEBDS, Diálogo Florestal (Forest Dialog), Ethos, and Observatório do Clima (Climate Observatory)||Business associations, businesses, civil society organizations||Contribute to the advancement and synergy of the agendas on protection, conservation, and sustainable use of forests, sustainable agriculture, mitigation and adaptation to climate change, in Brazil and worldwide||One of the Coalition’s pillars is: ‘Mechanisms for economic valuation of carbon and ecosystem services’. Among the three propositions in the pillar is: ‘Give scale and liquidity guarantee to existing carbon valuation mechanisms’|
|SOURCE: Elaborated by the Companies for the Climate Platform, with data from websites|
One of the objectives of Carbon Pricing Leadership Coalition is to show the effective role of pricing for a low-carbon economy, informs Juliana Lopes, Latin American Director of CDP, one of the organizations that participate in the coalition. The idea is to offer a feasible scenario to support government decisions and build public policies, as well as facilitate climate risk management for executives and investors.
According to her, the result of the first stage of this project was presented in panels with members of the Carbon Pricing Leardership Coalition, and it will go under a public consultation process, with engagement sessions involving different stakeholders. So, they will capture the opinions of numerous decision makers from different countries. Considering these inputs, the overall result of this project will be published in 2016.
Cambridge Institute for Sustainability Leadership report analyzes advances in the private sector in Europe regarding mitigation, after the European emissions trading system started operating. Check out how CEOs see the market and what drives them to engage in emission reduction efforts, even when carbon price is low.
And, in Brazil, an open letter from the Business Action for Climate Forum (Climate Forum) signals one more example of the private sector positioning in favor of pricing.