Page 31 - bne Magazine February 2023

bne February 2023 Companies & Markets I 31
Norway is expected to have the highest effective price among European nations, reaching $212/tonne of carbon dioxide equivalent (tCO2e) in 2030. Elsewhere, Canada is estimated to have an effective price of $93/tCO2e by 2030. Meanwhile, the effective carbon prices of China and the
US – the two biggest polluters – will barely break $30/tCO2e in 2050.
In the absence of stated policies, other economies like India and Saudi Arabia are not expected to price carbon anytime soon. For these countries, technical, administrative and political barriers remain, said the researchers.
Carbon prices should not have a notable impact on inflation and competitiveness, said the authors. The literature on the impact of carbon prices is mixed, with inflation from higher prices potentially mitigated by policy design and targeted fiscal spending. Furthermore, pricing carbon provides an incentive to switch to low-carbon energy sources, which should reduce the price impact over time.
Carbon prices will be necessary to reduce carbon emissions, they state. A carbon price sets a signal to market players to either reduce their emissions or pay to pollute. This then
allows the market to internalise the costs carbon imposes on the environment – such as air pollution and extreme weather events – shifting the burden of responsibility and increasing accountability for large emitters.
Decarbonisation at scale and pace will not happen without a high enough carbon price. Current carbon prices are too low and limited in scope.
Finland introduced the first tax on carbon in 1990, followed by a few European countries such as Poland, Norway and Sweden. The EU emissions trading scheme (ETS) was not introduced until 2005, and it was followed by other developing countries like New Zealand, Australia and Japan. Initiatives from emerging markets did not start until the early 2010s, and Africa just had its first carbon tax introduced in 2019 in South Africa.
Despite their introduction decades ago, prices have been too low. For example, carbon in the EU ETS was priced below €20/tCO2e ($21/tCO2e) between 2009 to 2018. To put this in perspective, the Report of the High-Level Commission on Carbon Prices wrote that the carbon price needs to be within the $50-$100/tCO2e range by 2030 for warming to stay below 2 degrees Celsius.”
Renewables to overtake coal in electricity generation soon
Martin Armstrong for Statista
With hundreds of protesters currently trying to
halt the continued development of a coal mine in Germany, which would involve the destruction of the now abandoned village of Lützerath, the further pursuit of fossil fuels in a country ostensibly seeking to phase them out is under the spotlight, Statista reports.
The main justification used by the German government is that the country's hand has been forced by the massive gap left by Russian oil and gas. At least in the short to medium term, coal has been selected as one answer to Germany's significant problem.
Longer term, it's renewables that are planned to dominate Germany's electricity mix, and this is something reflected
by an International Energy Agency (IEA) forecast. As this infographic shows, global use of coal for electricity generation outweighed that of renewables by 8 percentage points. By 2027, this is predicted to flip, with renewables accounting for 38% of global electricity production against 30% from coal.
The IEA report, released since the Russian invasion of Ukraine, says that the war has led countries "to increasingly value the energy security benefits of renewable energy." Although some
of the shorter-term solutions may be focused by necessity on fossil or nuclear sources, the future is looking more green. An additional factor in this ongoing shift quoted in the report were the "high fossil fuel and electricity prices resulting from the global energy crisis" that have "made renewable power technologies much more economically attractive".
Renewables Soon to Overtake Coal in Electricity Generation
(Forecast) distribution of global electricity generation, by technology
Source: International Energy Agency
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