In three years time, the vast majority of global carbon dioxide (CO2) emissions would come from jurisdictions with carbon pricing, as more former sceptics reinvented themselves as contributors to the carbon pricing infrastructure of the future and global leaders recognised the risk that climate change posed to the world economy.
This is according to advisory firm Promethium Carbon, which recently published its ‘Carbon Pricing Scenarios July 2013’ report.
South African is set to join others such as Australia, Japan and India by phasing in a carbon tax from January 1, 2015, as part of the country’s efforts to mitigate the effects of climate change and encourage energy efficiency measures.
Promethium director Robbie Louw said that a reasonable carbon price for South Africa, which emits 540-million tons of carbon each year, would be R100/t. Director Harmke Immink added that this rate would allow many carbon reduction projects that local firms had had to pull the plug on, as they were not viable, to start up again.
The National Treasury specified in a May 2 policy paper a carbon tax rate of R120/t of CO2-equivalent emissions, increasing at 10% a year during the first phase, from 2015 to 2019.
“Although the international carbon market remains in a weak state of repair, at least three-quarters of global gross domestic product [GDP] will, by 2015, be generated in an economic framework that places a price on carbon,” Louw stated.
He further noted that distortion of international trade was resulting from the increasing weight of carbon as a recognised global liability.
“Developments in carbon pricing, therefore, imply a complex mixture of risks and opportunities from the basis of new climate leadership and cooperation among unexpected allies.”
Among these were the European Union (EU) and Australia that have agreed on full harmonisation of emissions trading by 2018. Also significant was the forthcoming carbon-pricing link in California, the US, and Quebec, Canada, by 2014.
Louw stated that new leaders were emerging from among previously unlikely candidates, with the US and China increasingly playing a leading role in addressing climate change, despitethe US’s failure to ratify the Kyoto Protocol and the rapid development of the coal-fired power plants in China.
He added that an important development in the global carbon market was the increasing disconnect between the rapid deceleration of the United Nations Framework Convention on Climate Change (UNFCCC) process and the accelerating development of local and regional carbon markets.
Louw said development and cooperation among localised carbon initiatives have overtaken the UNFCCC as the primary driver in the race to curb emissions.
“With UNFCCC progress effectively stalled until 2020, the drive towards global carbon pricing rests increasingly in the realm of localised initiatives, be the market-based emissions trading scheme (ETS), offsets, new market mechanisms or nonmarket in nature such as a carbon tax. Numerous carbon pricing initiatives are at various sates of implementation across the globe and many have the potential to interlink and generate additional benefits,” he put forward.
Louw stated that the increasing role of ‘bottom-up’ carbon pricing was a highly visible development on the global economic horizon. Aside from the world’s largest ETS, the EU ETS, national or subnational schemes were already in operation in Australia, Japan, New Zealand, the US, China and Canada, with more planned in South Korea and Brazil.
Further initiatives, such as efficiency and certificate trading, fossil fuel subsidy removal and renewable-energy support structures were similarly multiplying from the ground-level up.
“Beyond a reversal of the top-down UNFCCC-led approach to climate change, we are also witnessing a policy reversal among key players in the carbon space on a macro level. More and more former climate sceptics across the spectrum of nations corporations and institutions are reinventing themselves as like-minded contributor to the carbon-pricing infrastructure of the future,” he highlighted.