World Bank: Combat Climate Change with a Carbon Pricing System

May 27, 2016Global Challengesby EW News Desk Team

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In 2015, a handful of nations undertook a social experiment. Urged by groups, including the World Bank, who felt that combatting climate change required an economic incentive, these adventurous countries, and a number of states, regions, and cities, have begun charging companies that produce carbon as part of their operation. In just a year, the benefits of these programs have already begun to show.

According to John Roome, Senior Director for Climate Change at the World Bank, carbon-pricing schemes offer tremendous benefits for both the people of the world, the environment, and the governments that enact these policies.

“Putting a price on carbon pollution is essential to help countries deliver on their promises for the Paris climate change agreement, as it’s an efficient and effective way to help cut emissions and send a clear signal to the private sector to invest in cleaner, greener growth.”

So far, Korea, Portugal, parts of Canada, and Australia have undertaken these policy changes, as well as a number of states, regions, and cities. China, however, recently announced its plans to create a new national emissions trading scheme in 2017.

As the second largest economy in the world, and the single largest polluter (contributing almost 30% of greenhouse gasses), such a scheme could lead to vast improvements in the world’s pollution levels and immense proceeds for the nation’s economy. If implemented, the World Bank estimates that China’s scheme could contribute $100 billion to the nation’s economy.

After experimenting with local carbon pricing schemes, and generating almost $1 billion in revenues, Mexico has decided to implement a nationwide framework by 2018. Canada also wishes to expand its program nationwide, though it is still in the preliminary stages of such a change.

Currently, about 13% of global carbon dioxide emissions fall under a carbon-pricing scheme in nations that account for about a quarter of all greenhouse gas emissions. This includes seven of the world’s ten biggest economies.

The World Bank said that following the climate change summit in Paris last December, the support for carbon pricing as a means of combatting emissions has galvanized. More than 100 nations submitted plans for reducing emissions pursuant to the agreements reached at the summit in an effort to reduce temperature rise to the agreed limit of “well below” 1.5 degrees Celsius. More than 90% of those plans included some form of carbon pricing system.

The International Monetary Fund (IMF) has also thrown its support behind carbon pricing schemes, saying that such programs should be “front and center” in the fight against climate change.

On the other hand, the Organization for Economic Cooperation and Development (OECD) feels that carbon pricing schemes are “woefully lacking,” with 90% of all emissions priced too low, and 60% not priced at all.

The world’s second largest emitter of greenhouse gasses, the United States, has no carbon-pricing scheme.