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Encouraging developments on carbon pricing

Release date:
3 August 2021
Bernard shares his views on carbon pricing and the recent events that could lead to its wider application in the global drive to tackle climate change

There’s been a series of encouraging developments on carbon pricing. 

Putting a price on emissions is not a new idea, but it has had a hard time getting as much traction as it deserves. As of 2020, 40 countries were using some form of carbon pricing mechanism, according to The World Bank. That’s a lot – but, in my view at least, still not enough.

However, recent events suggest we might be finding a path to wider application.

First, the G20 collectively endorsed carbon pricing for the first time – noting it is one of “a wide set of tools” to tackle climate change. 

Second, the new Fit for 55 climate legislation from the European Commission would bolster its system even further by applying a carbon price across the entire European economy. 

Third, China launched a new national carbon market, covering about 14% of the world’s energy-related emissions. And while it only applies to the power sector now, hopefully, over time, it will expand beyond – covering more and more emissions.

Finally, US Special Presidential Envoy for Climate John Kerry has asked business leaders to be more vocal in their support.

For more than two decades now, bp has supported a price on carbon. And last year, as part of our company’s new net zero aims – we said that we would stop corporate reputation advertising and direct those resources into actively advocating for well-designed climate policies.

And while carbon pricing won’t solve the climate challenge alone – we will need additional policies to deploy zero-carbon tech at scale, like hydrogen, CCUS and sustainable aviation fuel – it can still be a key tool.

For example, the EU’s emissions-trading scheme saw GHGs fall by 35% between 2005 and 2019 – while the economy grew by 20%.

So, a well-designed carbon price is both fair and efficient – making the highest emitters pay more, and harnessing the power of a market to create change. That’s good for business – especially greening businesses that embrace the energy transition.

Carbon pricing graphic courtesy of The World Bank

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