New Global Pathway on Carbon Pricing Can Shift Finance to Sustainable Investments: World Bank

PRESS RELEASE - Berlin, Germany - 29 May 2017 - New conclusions from the High-Level Commission on Carbon Prices, led by Nobel Laureate Joseph Stiglitz and Lord Nicholas Stern, provide the right advice at the right time to boost climate-friendly growth, investment and innovation, according to the World Bank’s Senior Director for Climate Change.

The High-Level Commission, which was convened by the Carbon Pricing Leadership Coalition and supported by the Government of France and the World Bank, brought together 13 leading economists from nine developed and developing countries to identify the range of carbon prices which would help deliver on the core goal of the Paris Agreement: keeping the rise in global temperatures to below 2 degrees Celsius.

The Commission’s report, released today in Berlin, concluded that a carbon price of $40-$80 per ton of CO2 equivalent by 2020, rising to $50-$100 per ton by 2030, when combined with supportive policies, would allow for achievement of the Paris goal.

“One of the strongest levers we have to shift financing toward climate action is putting a price on carbon,” said the World Bank’s Senior Director for Climate Change, John Roome.  “The Commission’s report provides the range of prices we need to make this happen, and spells out the complementary policies that will be needed to ensure carbon pricing works effectively, while recognizing that each country will need to choose the policy mix that best meets its needs.”

Among the supporting policies cited by the report are investing in public transportation infrastructure and renewable-based power generation, raising energy efficiency standards, adapting city design and planning, and land and forest management. Adopting such policies could allow for emissions reductions at a lower carbon price.

Roome said that a strong, predictable carbon price trajectory, as called for in the report, would help provide the stability the private sector needs to move investment into long-term, climate-friendly projects and help guide governments to integrate climate risks and opportunities into their planning and budgeting.

As part of its Climate Change Action Plan, the World Bank Group is working closely with countries around the world in areas like clean energy, sustainable urban development and climate smart-agriculture, to help them meet their development objectives and achieve their Paris climate commitments – the Nationally Determined Contributions, or NDCs.

“The Commission has put a global stake in the ground on carbon pricing,” said Roome.  “And as more countries adopt these recommendations, it opens up space for more international cooperation, which could bring down the costs of achieving the NDCs.”

The World Bank Group estimates that widespread global cooperation on carbon trading could bring down the costs of international climate mitigation efforts by up to 32 percent by 2030.

The Commission’s report also states that well-designed carbon pricing can be an efficient way of generating revenue. Such revenues can help governments strengthen social safety nets for poor and vulnerable communities and finance the infrastructure needed to provide access to basic services such as water, sanitation, and energy. They can also support reskilling for workers and green investments, or can be returned to households in the form of rebates or reduced taxes.   

In 2016, governments across the world generated $26 billion in revenues from carbon taxes - an increase by 60 percent over the year before. According to the World Bank’s just-released Carbon Pricing Watch 2017, the number of carbon pricing initiatives worldwide has almost doubled over the past five years.