This is a good week for carbon pricing

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Can we call it C-Day? The European Commission yesterday announced a large-scale plan to achieve EU carbon neutrality by 2050, and an intermediate target of reducing carbon emissions by 55% from 1990 levels by the end of the decade.The plan is called “suitable for 55 people” and Professional report In the Climate Capital Center of the British “Financial Times”, it covers a series of departments and policies.

When you are digesting Fit for 55, don’t ignore another important development. In the past few weeks and months, the support of influential institutions for setting meaningful carbon prices has increased significantly. Surprisingly, the chairperson of the committee, Ursula von der Leyen, herself focused the Fit for 55 package she announced on the need for an effective carbon price. More on this, but first let’s look at how carbon pricing emerged as a core concept, almost everywhere else.

Last weekend, the finance ministers and central bank governors of the G20 large economies met in Venice and signed a Conveyed This includes the recognition of carbon pricing “if appropriate”. This qualification is a recognition for those governments whose domestic politics discourage them from considering carbon pricing, and most importantly, the United States. Be cautious and noncommittal, although the wording may be so, My colleague emphasized This is the first time that the G20 collectively expressed support for this policy-as close as the world government we might get.

The day before the G20 meeting, the European Central Bank released a strategic review (here My assessment It ended the era when the European Central Bank extended its thumb like any other central bank).In the larger announcement, there is a little-known detail as part of its determination Incorporate climate change In its policy formulation process, the Eurozone central bank will begin to incorporate technical assumptions about carbon pricing when formulating macroeconomic forecasts. Free Lunch hopes that the European Central Bank will announce its carbon price path.

Finally, the International Monetary Fund has long promoted carbon pricing as a necessary part of a policy package. If it is not sufficient, the policy also includes investment in green technology and redistribution to help the poorest people cope with the financial burden.The staff of the fund has now proposed a Lowest carbon price in the world -Follow the route of the lowest limit of global corporate tax Recently obtained agreement -As explained recently International Monetary Fund blog post.

The author writes that this is necessary because “four-fifths of the world’s emissions are still unpriced, and the global average emissions price is only $3 per ton.” They suggested that the lowest carbon price can be distinguished between developed and underdeveloped countries, and in countries where domestic policies prevent clear carbon pricing (again, the United States), a carbon price equivalent measure can be designed to measure other policies, such as high Bans and regulations on emission activities.

The EU certainly has the ability to achieve comprehensive carbon pricing because it has already set carbon prices for those sectors covered by the existing emissions trading system. It is now stepping up its focus on this approach, expanding emissions trading to new sectors (aviation, shipping, road transport, and construction), betting that by redistributing part of the income that higher carbon prices will increase, it can calm the opposition people face more High cost of living. Especially the bets that the United States has not been willing to accept so far.

I think there are good reasons to believe that the EU will be proven correct in this regard. The first is that the closer you are to a single public carbon price for the entire economy-whether through EU emissions trading or a carbon tax-the easier it is to reduce emissions. That’s because the price signal creates the strongest incentive to implement the cheapest way and place to reduce (or capture) emissions. Coupled with redistribution, this is equivalent to using a social market economy (as von der Leinen emphasized) to achieve decarbonization, which is more effective and fairer than the command and control methods that the United States seems to rely on.

Secondly, on the other hand is the incentive for technological development. The EU has consciously combined decarbonization measures with investment subsidies as an industrial policy.There are signs that it’s working: many automakers now think that electric cars are Production is more profitable Than traditional, for example.

Finally, it allows a direct way to prevent other economies from unfairly taking advantage of those who take decarbonization seriously. As the EU’s carbon tariffs (proposed as part of the Fit for 55 package) show, domestic carbon prices can be extended to apply to imports.I think the EU should be committed to leading a “Carbon Club” Of the economies promised to implement ambitious carbon pricing at home, and to adjust access to the market with similar carbon pricing elsewhere. One step closer this week.

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