A barrel of oil fetches about US$80 on the global market. Consider the power of that price: It has driven extensive human endeavor, trillions of dollars in investment, technological breakthroughs, the creation of some of the world’s largest companies — all to extract fossil fuels from wherever in the world they can be found.
The burning of those fuels, among other things, would put about 36 billion tonnes of carbon dioxide into Earth’s atmosphere this year. Policymakers would like to push that number to zero.
However, getting there requires a powerful incentive — which is why governments must put a price on carbon as soon as possible.
A carbon tax would be the best approach. It would redirect investment toward green projects and allow governments to cut other taxes. However, the politics have so far proved insurmountable. Rich nations fear higher energy costs and a loss of competitiveness. Developing nations with carbon-intensive economies worry that they would pay more than their fair share. As of last year, sufficient carbon taxes applied to less than 5 percent of worldwide greenhouse gas emissions.
Another option is carbon trading, whereby governments impose emissions limits and let markets set the price. Participants able to reduce more can sell credits to those that cannot. The EU’s trading system, the largest of 36 such plans covering about one-fifth of global emissions, has set the cost of a tonne of carbon as high as US$110 (it is lower now, thanks partly to a clean-energy boom). In the separate, unregulated offset market, green-minded companies fund everything from carbon-capture technology in Denmark to forest conservation in Zimbabwe.
However, unifying those markets to achieve something close to a global price remains a distant prospect. Emissions reductions are not fungible like physical commodities: A tonne from a country with weak oversight might not be worth much — a tree-saving offset can go up in smoke or be an outright fraud. Prices range as low as US$1 per tonne for the shoddiest offsets, good for only the most desultory greenwashing. Quality-control efforts, laudable as they are, have a long way to go. Unless mitigation is perfect and permanent, crediting it against real emissions leaves the world further from net zero.
Meanwhile, valuable time is being lost. To prevent global warming from crossing the red line of 2°C, greenhouse gas emissions must be at least 25 percent lower in 2030 than they were in 2019. Pledges under the Paris Agreement would achieve only an 11 percent reduction. The global weighted average price of carbon is about US$5 per tonne, less than one-10th the minimum estimated level required to keep climate change in check.
Workable solutions are within reach. For examle, experts at the IMF have proposed price floors that governments could establish using taxes, carbon trading or equivalent measures. If set from US$35 to US$145 for the lowest-income to the highest-income countries, and combined with adequately ambitious emissions targets, that approach should be enough to get the world back on track to stay below 2°C.
What is needed is a deal that gets a critical mass of big countries moving together. Pressure is building — the EU’s new border adjustment, which taxes imports not subject to carbon prices, offers an impetus for the bloc’s trading partners to cooperate. With the right incentives in place, people and companies would seek the best and fastest ways to reduce emissions, potentially delivering vast economic benefits. The longer the delay, the more difficult the task would be.
The Bloomberg Editorial Board publishes the views of the editors across a range of national and global affairs.
On May 17, the Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP) joined forces to create a horrible spectacle. They began their plan to expand the powers of the legislature and gut the power of the incoming administration, which could potentially “Hong-Kong-ify” the legislature. They are using unscrupulous methods to make inroads into the judiciary, threatening that they would lock up officials or legislators for certain offenses, leading to public ire and worry. The Chinese Communist Party’s (CCP) subjugation of Hong Kong came about through four major stages. First: The CCP broadly looked for people it could coordinate with to
Taiwan’s exceptional expertise in semiconductor manufacturing has propelled the nation to a paramount position of global economic significance. With renowned foundries such as the Taiwan Semiconductor Manufacturing Co (TSMC) spearheading global high-end chip production, Taiwan’s dominance in this sector has not only catalyzed substantial economic growth, but also attracted considerable international attention and strategic interest. Nevertheless, Taiwan’s semiconductor industry is confronting potential challenges. The global shortage of high-end chips, fueled by surging demand in sectors such as artificial intelligence (AI), underscores the industry’s indispensable role in the global economy and the urgent need for solutions. At the same time, competitors are
It is a question that has kept wonks and pols busy for years: Can the US remain the world’s mightiest power, defending its own interests and the international order? Or is the US in the early stages of secular decline? The sight of Marine One soaring over my head toward the White House the other day was a useful reminder that it all depends on one’s point of view. Marine One is the iconic green-white helicopter that transports US presidents. Few images project “superpower” better than the president alighting from his chopper on the South Lawn to the salute of a
The Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP) have disregarded procedural justice and disguised their attempt at a power grab as legislative reforms, which has sparked a public outcry. More than 100,000 people, without being mobilized by any political parties or being led by a specific person, gathered outside the Legislative Yuan on Friday last week in opposition to the controversial reform bills. The protest has been called the Qingniao movement (bluebird movement, 青鳥運動), named after Qingdao E Road (青島東路) where the protest took place. “Qing” means blue and “dao” contains an element meaning “bird” in Chinese. It