Wednesday, 17 September 2014

Good news on carbon pricing: Chile, China and beyond

Post by Suzi Kerr

If global mitigation to achieve a 450 ppm stabilisation target were done efficiently, 70% of the costs would be incurred in developing countries according to modelling by Edmonds et al 2008. This is challenging when developing countries face strong competing priorities and limited resources.  However some developing countries are leading the way, creating the first steps that could allow them to take serious action – and facilitate significant resource transfers to help them do it.

Chile has just passed a tax reform bill that includes a new carbon tax of $5 per tonne of CO2.  This is an excellent next step in a country that has also recently opened its first large solar power plant and its largest ever wind farm at 115 MW.  Motu led an international team that described how in Chile a fixed carbon price such as the one they just introduced could be the first step toward an emissions trading system.  An emissions trading system in Chile could be linked to New Zealand’s system, allowing New Zealand businesses to work with Chilean ones to lower our joint emissions in a credible way and with an appropriate price – as opposed to through the Clean Development Mechanism.

China has also announced that it will introduce a national-scale emissions trading system in 2016 – replacing the regional pilot systems that have been critical platforms for learning. If China is successful in creating a credible system with real ambition it could transform international negotiations.

A major new report (report here, and Guardian article on the report here) chaired by the Mexican ex-president, Felipe Calderón, and advised by leading economists including Lord Stern and Nobel prize winners Daniel Kahneman and Michael Spence emphasises that addressing climate change while achieving prosperity is still possible, that the transformation involved will have large health and productivity co-benefits and that carbon pricing is a critical part of the strategy.

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