Carbon taxes must be six times higher to stop global warming, says Wood Mackenzie
(Bloomberg) --The world’s governments will need to significantly increase the cost of emitting carbon dioxide in order to keep global warming at bay.
That’s according to energy consultant Wood Mackenzie Ltd. To stop global temperatures from rising above 1.5 degree Celsius from pre-industrial levels, carbon prices must surge to $160 per ton of CO2 by 2030, up from a global average of $22 at the end of last year, it said in a report Thursday.
The industrialized world has been spewing carbon dioxide and other greenhouse gases faster than they can be contained for centuries. To rein in temperatures below 1.5 degrees Celsius -- as pledged by countries in the Paris Agreement -- governments have been trying to cut emissions through what’s known as carbon pricing, an approach that imposes a tax on carbon dioxide emitted or creates a market to trade permits to pollute.
While fossil fuel CO2 emissions dropped 7% last year due to the pandemic, the world must replicate similar declines every year throughout the 2020s and beyond or else face increasingly dire environmental consequences, according to an analysis published in the journal Nature Climate Change.
The price of carbon permits has recently climbed to a record in Europe amid speculative buying and efforts by policymakers to lower emissions, but Asian nations have lagged behind. Japan is considering revising its carbon tax, which is one of the lowest in the world. In China, online carbon trading is set to begin by the end of June.
Governments need carbon policies to push industries into adopting greener options for energy, such as hydrogen, WoodMac said in the report. That can be accomplished via carbon prices, direct incentives or tax policies, the consultancy said.
Higher CO2 prices could encourage companies to reduce their footprint through capturing the carbon, where it could then be recycled into new products, potentially a “trillion-dollar industry,” the report said.
“Getting to 1.5 degrees will be impossible without capturing, storing and using huge volumes of CO2,” said WoodMac analyst Tom Heggarty. “There are opportunities to commercialize and use captured carbon.”
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