CARBON PRICING MAY BE “BLAH, BLAH, BLAH” TO SOME, BUT TO MAKE THE NECESSARY CHANGES WE NEED TO FOCUS ON THE BORING STUFF.

By Peter Conway

​And what are those changes? At a wonderful dinner last night, I was asked “What would be the best thing to come out of COP26?”. For me, the big prize would be an international carbon price – that’s a game-changer.

Currently we have this in some markets (the UK and EU are prominent here). And it’s vital because otherwise, when we pollute the atmosphere there is no monetary cost to it. Worse, the environmental and human is socialised. And not just socialised among the wealthier higher polluting nations, but internationally and often affecting the most vulnerable.

And if change will be delivered through economic competition, this works best with a “level playing field”. When the UK and Europe price carbon above €50/t it’s clearly not level, so why allow cheaper, higher carbon-emitting goods to undercut the market?

One of the most positive things at Glasgow for COP 26 is how widely this is being discussed, alongside the pricing of “risk” of carbon, a concept ranging from the cost of insurance (a huge topic given the catastrophic fires in Australia and California, along with the snowstorms of Texas), bank capital requirements for loans to carbon emitters (on the basis that these will rise to reflect risk-increase) through to the risk of stranded assets (potentially including coal-fired power stations).
The next major step for carbon pricing may well be the EU going ahead with the Carbon Border Adjustment Mechanism, which will levy tariffs on carbon imported in the EU, helping to internationalise carbon costs.
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My takeaway? Forget the sexy-sounding slogans and focus on the boring detail. Glasgow COP 26 is unlikely to deliver a “silver bullet” but will be a significant milestone on a lengthy journey to “net zero”. And “net zero” as a destination will change as greater clarity and more detailed requirements – all that “boring stuff” - is refined.
Sadly, we’re not yet at the point of international carbon pricing, but the issue is now mainstream, widely discussed alongside mechanisms for implementation, and that in itself is a significant step.