French President François Hollande, who hosted the Paris climate conference in December 2015, has said that his country would take the lead to set a price on carbon, according to an official UN communiqué, released on Saturday.
This is significant given that while the >Paris agreement does mention carbon pricing, it does not compel anyone to implement it.
Carbon pricing is an alternative to a regime of emissions trading that much of the world signed up for in 1997, as part of the Kyoto Protocol. But emissions trading – according to which countries who meet their emission targets could sell ‘credits’ to those who struggle to meet them – hasn’t been successful in emissions reduction. The ‘carbon market’ was also seen by critics as a way for polluters to continue business as usual.
Also, a price on carbon is considered to be a diplomatic way to get countries to own responsibility for their polluting actions, which has otherwise proven to be difficult in the past, with countries such as the U.S. opposing legally binding emission caps.
A price on carbon has been long seen by climatologists as an important step toward doing away with dirty fuel. Former NASA scientist James Hansen, for instance, has for long held the view that as long as fossil fuels appear to be the cheapest fuels out there, they will be continued to be burned.
Nobel laureate and economist Joseph Stiglitz has been another advocate for carbon pricing. Writing in The Economists’ Voice way back in 2006-07, Mr. Stiglitz had suggested that each country could keep its own revenues and use them to replace taxes on capital and labour as it makes much more sense to tax “bads” (pollution, like greenhouse gas emissions) than to tax “goods,” like work and saving.
At the Signature Ceremony of the Paris climate agreement on Friday, where 175 countries of the world got together at the UN headquarters in New York, the United Nations Global Compact Executive Director Lise Kingo called on companies around the world to set an internal carbon price at a minimum of $100 per metric ton over time.
In December 2015, soon after the Paris agreement was finalised, the heads of states of France, Germany, Mexico, Canada, Ethiopia and Chile, along with the World Bank Group and the International Monetary Fund, had called on countries and companies to price carbon so that the money thus raised could be invested in green technologies.