Business Leaders Call for Long-term, Stable Carbon Pricing Policies

A new report by the High-Level Commission on Carbon Pricing and Competitiveness calls on industry peers and governments to adopt strong carbon pricing policies.

As more businesses develop low-carbon strategies, the report suggests that supportive government policies can act in tandem to unlock economic opportunities and manage competitiveness concerns.

According to the report, which consists of CEOs and senior executives from leading companies, as well as former high-level government officials and representatives from academia, carbon pricing is a flexible and low-cost approach to reduce greenhouse gases.

High-Level Commission on Carbon Pricing and Competitiveness states that carbon pricing, along with other policies, such as increased investment in low-carbon technologies, can drive innovation in industries and foster continuous process improvement.

“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.

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 also finds that other variables including 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.

Early evidence from advanced economies demonstrate 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, according to the report.

“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 British Columbia introduced a carbon tax, a new clean technology sector emerged, comprising over 200 companies collectively generating $1.7b annually,” says the business leaders.

Other jurisdictions that have been successful at managing the impact of carbon prices on international competitiveness for high-emitting and trade-exposed sectors include:

  • Sweden’s carbon tax, which is the highest in the world at kr1173/tCO2e (US$127/tCO2e) was accompanied by policies to deliver a significant reduction in the marginal tax rates on energy, capital, and labor. According to Sweden’s Ministry of Finance, during the 1990-2015 period, Sweden’s GDP increased by 75 per cent, while GHG emissions went down 26 per cent.
  • 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, therefore leveling the playing field.

Click here to download the report, and view additional endorsers.

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