FORMS OF CARBON PRICING AND AVENUES FOR …...Emissions Trading System Limits the quantity of GHGs...
Transcript of FORMS OF CARBON PRICING AND AVENUES FOR …...Emissions Trading System Limits the quantity of GHGs...
I4CE– InstituteforClimateEconomics
FORMSOFCARBONPRICINGANDAVENUESFORINTERNATIONALCOOPERATIVEAPPROACHES
FromoperationalcarbonpricingtomainstreamingclimateBENOITLEGUET03/07/2017
TRIGGERINGTHELOWCARBONTRANSITION:ARTICULATINGCARBONPRICINGAND
CLIMATEFINANCE
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What is intheParisAgreement?
1. Limit global warming well below 2°C while aiming at bringing it to 1.5° with an aim to reach global peaking of GHG emissions as soon as possible” and zero-net emissions by the second half of this century.
2. Increasing the ability to adapt tothe adverse impacts of climate change by promoting resilienceand low-carbon development, in a manner that does not threaten food production;
3. Making financial flows “consistent” with low-carbon climate-resilient development.
I4CE
REDIRECTING(andreaching)5,000G$peryear ofpublic&private investment
Source: New Climate Economy, 2016
Keymessages1. Carbon pricing policies can help mainstream
climate into macroeconomic policies
2. Explicit carbon pricing is only one of the options, and carbon pricing is a piece of a broader policy package
3. Carbon revenues can help bridge the gap to mainstreaming climate in public policies
4. The PA provides a platform for international cooperative approaches for carbon pricing
5. Need for ambition on the demand and the supply side of finance
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- Leadtofuel-switchingfromcoaltogas.- Incentivetoproductionandconsumptionefficiency i.e EE- Makenear-to-marketlow-carbontechnologiescost-effective
- Backstopotherlow-carbonsupportpolicies
- Driveallnecessarylow-carboninvestmentsinenergyandindustrysectors- Forceearlyretirementofhigh-carbonassets
-Stimulateshiftsinconsumptionpatterns- Spurinnovationinlow-carbontechnologies
- Mainstreamclimateinfiscalpolicies,andpublicpolicies;- Scale-up low-emissioninfrastructures;- Multiple co-benefits- AchievedevelopmentpathwayswithlowGHGandhighresiliencetotheeffectsofclimatechange-
1 | The role of carbon pricingIncreasing contribution to mainstreaming climate in macroeconomics policies
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CAN
CANNOT
COULD
Withoutcomplementary policies
Withanefficientcarbonrevenuesmanagement
+Awell-alignedpolicyframework
Operationalstep Transformativestep Targetedgrowthstep
MIC
ROM
ITIG
ATIO
NIM
PACTS
MACROM
ITIG
ATIO
NIM
PACTS
2 |DifferentoptionsforcarbonpricingTheglobalmapofexplicitcarbonpricing:alimitedviewoftheimplicitreality
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2 |DifferentoptionsforcarbonpricingWhywouldthefinancialsectorcare?
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EmissionsTradingSystemLimitsthequantityofGHGsthatcanbeemittedoveraperiodoftime
CarbonTaxAppliesacosttothedistribution,saleoruseoffossilfuelsandcanbebasedonthecarbonintensityofanactivityorproduct.
OffsetMechanismTocompensateforonetonneofemissionsreductionsbyinvestinginonetonneofemissionsreductionselsewhere
FinancialinstrumentsToreducetheupfrontcostsofmitigationactionsusingtoolssuchaspublicguarantees,interestratesubsidiesandtaxbreaks
ShadowpricinginpublicsectorTohelpreorientinvestmentdecisions,oraccountforindirectimpactsonemissions(e.g.,whenpublicinfrastructureinvestmentsaffectemissions)
InternalcarbonpriceTohelpcompaniestoguideinvestmentdecisionsforacleanerfuture,anticipatefuturepricingpoliciesorfuturechangesinthecarbonprice,orhelpmitigaterisks.
2 | Carbon pricing: a piece of a broader package of energy and climate policiesAligningallpoliciesamongthemselvestoclimateobjectivesisachallengeforpolicymakers.
Renewableenergypolicies
Energyefficiencypolicies
Energytaxes
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Carbonpricing
InnovationandR&Dpolicies
Sectoralpolicies
Socialpolicies
Employmentpolicies
• Avoidingoverlappingpolicies,
• Removingcountervailingpolicies
• Pushingupcomplementarypolicies.
3 |Howtousecarbonrevenues:bridgingthegaptomainstreamclimate?
« Environmental »carbontax• ImplementingParisAgreement• Env.Min.Authority• Greenspending,earmarking
Changeindestinationofrevenues:fromearmarkingtowardsFinanceMin.takeover
Mainstreamingclimateactioninafiscalreform
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“Designthinking”forcarbonrevenuesshouldhelpphaseininclusivefiscalreforms
Source:« StateandTrendsofcarbon pricing »,WorldBankOctober 2016
• International cooperative approaches can play a significant role in:– Reducing costs of GHG emission reduction– Achieving a more ambitious GHG reduction target– Facilitating financial flows between cooperative states
4 |InternationalcooperativeapproachesA potential tool for achieving the Paris agreement’s objectives
4|Internationalcooperativeapproaches
AVENUESINTHEPARISAGREEMENTUNDERCONSTRUCTION
§ Article2– Redirectionoffinancialflows
§ Article6– 6.2&6.3:Cooperative
approaches– 6.4:Marketcooperative
approaches– 6.7:Non-Marketcooperative
approaches§ Article10
– Atechnologyframework– ATechnologymechanism
AFEWCONCRETEAVENUESFORINTERNATIONALCOOPERATION
§ Creditingmechanism(offsets)§ Sectoralagreements(“carbon
clubs”)§ R&Dandtechnologytransfers§ Capacitybuilding§ InfrastructuresPrivatePublic
Partnerships§ Alignmentofpracticesfor
publicdevelopmentbanks
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Which framework to stimulate bottom-up action?
5 |Nextchallenge:Scalingupcarbonpricingpoliciestoclimateambition
Whatarethemajorconditionstoenhanceawell-alignedpolicyframeworktooptimizecarbonpricingpotential?
§ 4potentialconditions:1. Politicalsignals2. Economicsignals3. Governance4. Socialacceptability
§ Learningmattersandthepaceofchangematterstoo.– Consideringadynamicapproach:needtothinkandpresent
transitionintermsofpoliticallearningcurvesandprocesses,notsnapshots.
§ Pathways,motivationsandnarrativesfordevelopingcountriesarenotsimilartothosefordevelopedcountries:– Consideringnationalcontexts:weneedtoadaptmaterialsfor
encouragingthisalignmentindevelopingcountries.
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5 |Onthesupply side:also needs tobe takeninto account
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NationalLow-CarbonPathway NationalPolicyFramework
EconomicEnvironment
Demandandeconomic
environmentforprojectsandsectors
FinancialValueChain
Projectdevelopers/SMEs
LCCRProjects
LCCRProjects
LCCRProjects
€€€Sources of capitalIntermediariesInstruments
Risk-Return ProfileEconomic Conditions
UncertaintyIntegration of externalitiesInvestment Opportunities
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€€€
Source: I4CE 2016
5 |Onthesupply side:climate finance,accelerating thepace
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Disclosure
PortfolioDecarbonization
Engagement
Divestment
Policy
GreeningPortfolios
Art. 173, French Law on Energy
Transition
I4CE– InstituteforClimateEconomics24AvenueMarceau75008PARISwww.i4ce.org|[email protected]|
Thank you for your attention
Contact: [email protected]@I4CE_ @BenoitLeguet