A new report by the High-Level Commission on Carbon Pricing and Competitiveness— comprising of CEOs and senior executives from leading global companies, as well as former high-level government officials and representatives from academia—calls on industry peers and governments to adopt strong carbon pricing policies."Carbon pricing is an effective response, especially when coupled with other policies,” said Anand Mahindra, Chairman, Mahindra Group.
The High-Level Commission on Carbon Pricing and Competitiveness, a group of business leaders and other “eminent leaders” from the public sector and academia convened by the Carbon Pricing Leadership Coalition (CPLC) has published its report that tackles concerns about industrial competitiveness finding that these can be addressed through strong carbon pricing policies.
As more businesses develop low-carbon strategies, supportive government policies can act in tandem to unlock economic opportunities and manage competitiveness concerns,
Bold and immediate commitment is needed to respond to the challenge of climate change. Carbon pricing is an effective response, especially when coupled with other policies. It can result in remarkable opportunities for corporations, countries, and communities, said Anand Mahindra, Chairman, Mahindra Group.
Joining the Commission on this call for strong carbon prices are leading companies and organizations that have endorsed the report’s key findings. Carbon pricing is a flexible and low-cost approach to reduce greenhouse gases (GHG).
Carbon pricing promotes investment and industrial growth
Carbon pricing, along with other policies, such as increased investment in low-carbon technologies, can drive innovation in industries and foster continuous process improvement. Taken together, these policies will facilitate the transition to a low-carbon economy, even in highly emissions-intensive and trade-exposed sectors.
Carbon pricing has proven to be one of the most effective tools to unlock the potential from the private sector to support innovation and low-carbon growth. Carbon pricing is only one of many elements determining global competitiveness and plays a smaller role than other factors, for instance, labour and infrastructure, said Feike Sijbesma, CEO, DSM.
The report finds a wealth of experience on how other policies, such as lowering other corporate taxes and providing technology innovation assistance to emerging industries, can support carbon pricing and alleviate competitiveness concerns.
It finds that other variables—such as corporate tax rates, energy prices, wage rates, labor availability, infrastructure, geographic location, cost of capital, exchange rates, commodities and materials prices—have as large an impact as carbon pricing does on most industry decisions to locate or invest.
Furthermore, early evidence from advanced economies shows that putting a price on carbon pollution does not curtail industrial growth or prompt polluters to move to countries that do not charge such a price.
Additionally, carbon pricing can be advantageous for low-emitting firms and has the potential to boost new industries and advance innovation in existing ones. For example, after the Canadian province British Columbia (BC) introduced a carbon tax, a new clean technology sector emerged, comprising over 200 companies collectively generating CA$1.7 billion annually.
Other jurisdictions have also been successful at managing the impact of carbon prices on international competitiveness for high-emitting and trade-exposed sectors. Some examples include:
- Sweden’s carbon tax, which is the highest in the world at SEK 1 173 per tonne (tCO2e) (≈US$127/tCO2e) was accompanied by policies to deliver a significant reduction in the marginal tax rates on energy, capital, and labour. According to Sweden’s Ministry of Finance, during the 1990-2015 period, Sweden’s GDP increased by 75 percent, while GHG emissions decreased by 26 percent.
- California successfully enacted a carbon price and other measures that addressed sector-specific competitiveness concerns, despite the fact that its electricity grid is connected to several states that do not have a carbon price. The state used border adjustment measures to address specific competitiveness, requiring electricity imported from border states to obtain emissions allowances, thus leveling the playing field.
The report has received broad support and endorsements from businesses community, including international companies with several from WEF CEO Climate Leaders Alliance and influential organizations such as WBCSD, We Mean Business and ICC.
Duties, the Swedish experience shows that a carbon tax can be easy to implement and administer, at low costs
to authorities and operators. The carbon tax is levied on all fossil fuels in proportion to their carbon content.
