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The OECD is looking for a new global plan for carbon prices that it says will prevent trade wars between countries with different green policies.
The Paris Club of Nations strives to follow its success by concluding an initial agreement between countries on corporate taxation with a similar approach to carbon prices. This will quickly enable economies such as the EU to curb emissions, while imposing reasonable carbon tax on imports from heavier polluting countries.
According to persons present, Mathias Cormann, the Secretary-General of the OECD, called on the EU to support the plan during the meeting of finance ministers last weekend. Cormann suggested that the European Commission join the project.
Setting a price for carbon is generally considered to be the best way to reduce fossil fuel emissions, as pollutants can then be effectively taxed for the carbon they emit. One of its most important points, however, is to determine what the price should be. The OECD believes it has a global solution.
A carbon price high enough to limit temperature rises to below 2 ° C is seen by the US, China and India as a step. They prefer to use domestic regulations to reduce emissions, such as the ban on coal-fired power stations.
Rather, the EU is pushing for a plan to extend carbon prices to emitters within the bloc. Furthermore, he promised to protect the domestic industry through a carbon tax on imported goods, such as steel and cement, which releases a lot of carbon.
However, this approach is causing protests from EU trading partners who see it as a trade tariff.
John Kerry, US President Joe Biden’s Envoy on the Climate, warned the EU in March that a carbon frontier adjustment should be a ‘last resort’ and ‘could have serious consequences for relations and trade’. Kerry has since said the US can consider a similar scheme, although it carefully thought through the consequences.
OECD officials are privately critical of the EU approach. They are afraid it could lead to too high a carbon tax in the EU if it is only taken into account explicit carbon prices imposed by other economies.
Rather, the OECD wants the EU approach to be included implicit carbon tax used by other countries that have different carbon reduction measures, such as the ban on coal-fired power stations.
By including these measures, the threats of a global trade war on environmental policy can be reduced. That is why Cormann, who previously worked in the Australian government, who was one of the underdogs in drafting climate change policy, raised the OECD plan at a meeting of the EU’s 27 finance ministers in Slovenia on Saturday.
Under the OECD plan, countries and economists would use a voluntary framework to agree on how to best price carbon taxes and other forms of environmental regulation. This in turn could help to obtain permission for an international framework for taxation on carbon frontiers, thus avoiding possible trade battles.
A European Commission official said: “We are always ready to talk to all partners and are open to cooperation with the OECD. We also know how difficult it will be to find global consensus on carbon prices, and time is not on our side. ”
Several major economies already operate a regulated carbon market, which includes buying and selling greenhouse guests. This includes the EU, which has seen carbon prices rise to more than € 60 per tonne on its currency trading system this year.
China also has recently launched its own limited ETS, and California operates a substantial cap and trade program.
The IMF has proposed that a carbon price of $ 75 per tonne be applied worldwide by 2030, but it has not received international support.
The EU recently unveiled measures to help achieve its goal of reducing the block’s average carbon emissions by 55 percent by 2030, compared to 1990 levels. The proposed carbon frontier adjustment is at the heart of its strategy and will initially target a limited range of more polluting imports from outside the EU, including iron, steel and cement.