Put a right price on carbon – Business leaders tell governments at COP26

The International Chamber of Commerce (ICC) has today called on governments to “get smart” in how they use carbon pricing instruments to accelerate the transition to a net-zero economy at the lowest possible economic cost.

At an informal dialogue with finance ministers at COP26, the global business organization will publish the findings of an extensive survey of companies’ experience operating under the 60 different carbon pricing regimes in force today throughout the world.

The results point to widespread concern amongst businesses about the growing fragmentation of systems used to price greenhouse gas emissions – emphasising that greater international harmonization of policy approaches will be essential to mobilize the private investment needed to achieve net-zero emissions by 2050.

Speaking in Glasgow ahead of the launch of the new report, ICC Secretary General John W.H. Denton AO said: “We’ve heard much talk over recent days about the need for governments to show more ‘ambition’, but an essential corollary to this is the need for them to get smart in the design of policy instruments to accelerate climate action. The experience of business shows there’s significant room to enhance the configuration of carbon pricing tools to allow governments to go further and faster in their decarbonization plans.

“As our report shows, international consistency is the absolute key to unlock the full environmental and economic benefits of market-based policies. That’s why, from a real economy perspective, we need COP26 to deliver tangible outcomes to drive harmonization of existing carbon pricing instruments – starting with robust rules to enable the trading of emissions and offsets across borders under Article 6 of the Paris Agreement.”

The ICC report presents 10 core principles for the effective design of carbon pricing instruments, including an appeal to governments to ensure that such measures are focused squarely on reducing GHG emissions – rather than being used, for instance, as a vehicle to boost government revenues. The principles also highlight the imperative to establish clear, transparent pricing frameworks and, moreover, urge governments to pay greater attention to avoiding inconsistencies or conflicts with other energy, trade and taxation policies.

Mr Denton added: “Chancellor Merkel and many other leaders this week have, quite understandably, spoken about the need to put a global price on carbon. The principles we are setting out today are, without doubt, an essential foundation for the convergence required to meet this goal. Governments need to wake up to the fact that the growing patchwork of national carbon pricing tools will only ultimately slow the pace of achieving net-zero emissions and significantly drive up the cost of doing so.”

The report was developed drawing on insights from around 200 companies with international operations – as well as input from ICC’s global network in over 130 countries.

Wendy Miles QC, co-chair of the Task Force that produced the report, said: “This report has benefited from the remarkable specialist commercial expertise within the ICC secretariat and membership, in order to set out simple principles for carbon pricing mechanisms, aimed at enhancing and advancing the role that international trade and investment is able to play in the global transition to net zero.”

An Theeuwes, the other Task Force co-chair, added: “Besides a wealth of knowledge and different perspectives, the discussions in preparing these principles show an overwhelming willingness and interest of business to engage and contribute on carbon pricing mechanisms, so as to speed up the energy transition and take actions toward achieving net-zero emissions more tangible.”

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