International Momentum Builds For Price On Carbon, End to Fossil Subsidies

Suddenly, calling for action on climate change is Trendy and Cool as industry after industry issues strong statements.

Over the last six months, we’ve seen calls for action from Europe’s oil industry, and the world’s airline, food, banking, and power industries. 

81 of the largest US companies signed President Obama’s American Business Act on Climate pledge and 36 of the world’s major corporations committed to running on 100% renewable electricity.

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Now, some of the world’s most energy-intensive and tech companies issued a statement: BHP Billiton and Rio Tinto (coal miners); Shell (oil); Alcoa (aluminum); LarfargeHolcim (cement); Calpine Corp., National Grid, PG&E (power); and Hewlett-Packard, Intel, Schneider Electric and Siemens.

"As businesses concerned about the well-being of our investors, our customers, our communities and our planet, we are committed to working on our own and in partnership with governments to mobilize the technology, investment and innovation needed to transition to a sustainable low-carbon economy.

"We believe the Paris agreement should commit all parties to undertake nationally determined efforts to reduce greenhouse gas emissions; provide strong transparency to hold countries accountable; require periodic renewal of national contributions to progressively strengthen the global effort; and facilitate international carbon markets," the statement says.

Like other industries, the companies are looking for certainty that guides long-term investment and a level playing field that ensures all countries and corporations will operate under the same rules.

They point to the value of an international carbon trading system as "a critical tool for cost-effective emissions reduction."

Consensus Increases for Carbon Price

Amazingly, 80% of country climate pledges include a price on carbon, and at least 40 countries already have a carbon tax or cap-and-trade system. Notably, China will launch national cap-and-trade in 2017.

The World Bank has been actively advocating for a carbon tax and an end to fossil fuel subsidies. "This year we are starting to see a mainstreaming of the debate," says Rachel Kyte, Vice President at The World Bank.

This week, France, Germany, Mexico, Chile, Ethiopia and the Philippines issued a statement voicing their support for a price on carbon as "the most tangible signal that can be sent to all economic actors," says Francois Hollande, President of France. 

As "Friends of Fossil Fuel Subsidy Reform," Sweden, Denmark, Norway, Finland, Switzerland, New Zealand and Costa Rica are calling for an end to fossil fuel subsidies to be part of the Paris agreement.

Noting that $800-$1 trillion a year is spent to subsidize fossil fuels, World Bank President Jim Yong Kim says they disproportionately go to the richest 20% instead of the poorest 20%, while they send the wrong signal – to burn more carbon.

Cash set aside for subsidies should instead be used to fully finance the Green Climate Fund – which helps developing countries – at $100 billion a year, as promised.

In addition, Kim says the World Bank’s priority is to spend "more on energy efficiency, measures to make agriculture greener and changes that help cities become less polluted and more liveable," reports The Guardian.

But while The World Bank insists it has cut support for fossil fuels by almost half from 2013-14, while significantly increasing financing for renewable energy, a report documents it has continued to subsidize fossil fuel projects to the tune of $3.4 billion during that time – a 23% rise.

In a report released on Friday, Oil Change International (OCI) identified $3.4bn (£2.3bn) of loans, grants, guarantees, risk management and equity for fossil fuel-related projects in the developing world in the 2013-14 financial year. This was the highest recorded in four years and up 23% on the year before although the bank said it disagreed with lumping in both direct and indirect funding.

Development Banks Increase Climate Spending

Meanwhile, the world’s major development banks announced they will significantly increase funding for projects that fight climate change. 

By 2020, The World Bank will increase funding to 28% of its total (from 21% now), making as much as $29 billion a year available to help developing countries, up from a projected $16 billion.

The European Bank for Reconstruction and Development will spend 40% of its total on climate (up from 25% now); Inter-American Development Bank will double funding; and African Development Bank will triple it to $5 billion a year, dedicating 40% of its total to green projects. 

And importantly, the world’s major development banks signed a pledge to screen all new projects for climate risk by 2018. 

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