On July 7, high ranking officials, policy makers and scholars from China, the European Union and the United States and representatives of the International Monetary Fund (IMF) and Organization of Economic and Development (OECD) gathered through the webinar to discuss a global approach to carbon pricing, a promising silver bullet in the fight against global warming.
 
Co-organized by the International Finance Forum (IFF), the Task Force on Carbon Pricing in Europe and the Paulson Institute, the webinar intends to pave the way for a debate on creating a global carbon pricing mechanism during the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow this November.
 
The webinar focused on two issues: the efficiency of carbon pricing in fighting global warming and tackling carbon leakage. In respect of efficiency, the key point is to encourage the world’s three major economic powers and carbon emitters, the US, the European Union and China, to work out a common trilateral approach to carbon pricing.
 
“The three main economic powers in the world, which are also the three main emitters of carbon as well, working together on carbon pricing would be a signal of a game changer for the success of energy transition,” said Edmond Alphandery, Chairman and Founder of the Task Force on Carbon Pricing in Europe and former Finance Minister of France, at the IFF 2021 Spring Meetings in May when introducing the trilateral carbon pricing collaboration.
 
Held soon after the meeting of ministers of foreign affairs and development of G20 countries in Matera, Italy, last week, the webinar on carbon pricing is another signal of multilateral cooperation in facing the urgent challenge of climate change, at a time when many countries have already started drafting or implementing their stimulating plans for the post-pandemic era. However, researches show that traditional economic recovery stimulation packages would dramatically increase carbon emission and make the world deviate from achieving the goal of the Paris Agreement, which is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.
 
The most recent research from the United Nations indicates that the speed of global warming is accelerating. According to Laurent Fabius, Chairman of the 2015 UN Climate Change Conference in Paris (COP21), a UN research shows that there are now 40% of risk that average worldwide temperature will overcome the 1.5 degree limit before 2026. The common objective and commitment set by the Paris Agreement is to keep it stay under this limit till the end of this century. “It means a genuine Red Alert,” Fabius said at the IFF 2021 Spring Meetings. He warned that continuing on the current trajectory, the world may risk a warming of three or four degrees by the end of the century. “I personally believe that putting a price on carbon emissions is essential,” Fabius said.
 
At the webinar, the “Tax Policy and Climate Change” report, which is jointly released by the IMF and OCED and addressed to world financial leaders, was introduced. The Report opens with a discussion of the need for carbon pricing to meet the goal of the 2015 Paris Agreement and states that current emissions commitments and policies are not sufficient to meet the goal. The Report describes carbon pricing “as an indispensable tool in any cost-effective climate change mitigation strategy,” and details the strengths of carbon pricing. Such strengths are described as increasing the appeal to both firms and households to reduce greenhouse gas emissions and increase green energy use. While encouraging private investment in clean technologies, carbon pricing demonstrates more flexibility than regulatory approaches and long-range effectiveness as well as increases government revenue.
 
Among the three major economies, the EU leads the emission trade, with a well developed carbon market launched as early as in 2005 and at a current price of about 50 euros per ton of carbon dioxide. China officially announced its emission goals in 2019 to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060 and officially opened its national emission trade system in Shanghai this month. US President Biden signed the instrument to bring the United States back into the Paris Agreement on his first day in office in January. According to the UN, about 126 governments have formally discussed implementing net zero emission targets around 2050.
 
The EU-China Carbon Pricing Initiative has been promoted by both the IFF and the Task Forces on Carbon Pricing in Europe since 2019. This is the first participation from the US and the trilateral co-organization, and there will be a second webinar in autumn before the Glasgow COP26 to discuss about carbon pricing and global governance.
 
International Finance Forum (IFF) is a non-profit, non-governmental independent international organization based in China. Founded in October 2003 by leaders of more than 20 countries and regions such as China, the United States, the European Union, the United Nations and related international organizations, it is an institution for high-level permanent dialogue, exchange and research in global finance, and is designated as "F20 (Finance 20)" in global finance.