Carbon pricing will ensure a just and equitable net-zero future

Dangerous man-made climate change is no longer a worrying forecast, it is an emergency that must be addressed right now.

The latest report by the Intergovernmental Panel on Climate Change, published in August, described climate change as “widespread, rapid, and intensifying.” It stated that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5 [degrees Celsius] or even 2 [degrees Celsius] will be beyond reach.”

Extreme weather events have continued to evidence the real impacts on our planet. This summer, heatwaves and major wildfires have ravaged the Pacific Northwest, Siberia, Greece, the Middle East and Southeast Asia. It is beyond question that we need to act now.

What the past year has shown us is that humankind can achieve great things when we collectively acknowledge an existential urgency. Organizations across the world worked day and night to accelerate the invention and mass production of life-saving vaccines for COVID-19.

We can and must put this same energy into joined up efforts to prevent further climate change that is rapidly becoming irreversible.

Effective strategies and tools to support the necessary shift toward carbon neutral economies have already been developed. What is needed is cohesive uptake. If adopted in a comprehensive way, carbon pricing has the potential to structurally transform industries and economies for good.

Carbon pricing is one of the most effective and least costly policy options for emissions reduction. Putting a price on carbon allows people and the private sector to switch away from fossil fuels on their terms while protecting economic growth and stimulating innovation. It can generate revenue to invest in a clean energy grid, energy-efficient homes and buildings, as well as in the research and development of new solutions toward achieving our net-zero ambitions.

For governments, carbon pricing will incentivize the market toward cleaner methods of production and energy sources while creating green jobs and resilient communities. And, as governments bring forward legislation, businesses, too, have a significant role to play. More than 1,600 companies, including 100 of the Fortune Global 500, have already set an internal price on carbon. This is a clear signal that markets are shifting, but more needs to be done — and faster.

We need public-private collaboration now more than ever. I was recently appointed Co-Chair of the Carbon Pricing Leadership Coalition, a voluntary initiative administered by the World Bank. Its mission is to advance carbon pricing as one of the essential tools in establishing a greener, cleaner, more circular economy. The coalition unites businesses, governments and organizations, creating an ambition loop where government policies and private sector leadership reinforce each to drive substantive action. Through knowledge-sharing it provides practical tools, inspires, and helps shape government and corporate strategies aligned with a 1.5-degree Celsius future. 

At a global level, we need the support of policymakers to bring in an effective system of carbon pricing that facilitates the free flow of low-carbon goods. A new economic architecture needs to incentivise decarbonisation by rewarding low-carbon producers. It would also broaden access to and increase the affordability of low-carbon technologies, low-carbon goods and services.

Shifting gear from incremental progress to immediate action requires public and private sectors to be coordinated but not codependent. Businesses should not simply wait for an invisible hand to provide direction. We must roll up our sleeves and take action for ourselves. In the same spirit, governments should have the confidence to ask more of global corporates — their bottom lines will thank them in the long-run.

Gregory Barker serves as co-chair of the World Bank’s Carbon Pricing Leadership Coalition. He is the executive chairman of En+ Group and the former UK Minister for Energy & Climate Change. Follow him on Twitter: @GregBarkerUK