Pricing carbon: Is this the year?

At the close of COP21, French President Francois Hollande promised to build on the Paris Agreement by advocating for a global carbon tax.

ICAPPutting a price on carbon has been done at regional, national, and subnational levels thus far. Some jurisdictions have used the cap and trade approach while others have levied a carbon tax.

Today the International Carbon Action Partnership (ICAP) issued a report predicting that 16% of global GHGs will be covered by carbon markets by 2017, up from 9% in 2016. The report underscores that emissions trading schemes (ETS) are currently found on 4 continents, 35 countries, 13 provinces and states, and 7 cities.  Analyzing the coming growth, it points to pledges in the 185 INDCs filed pre-COP21 that indicated intent by almost half of these countries to use market mechanisms to mitigate GHG emissions.  ICAP specifically highlights China’s announcement in 2015 to expand its province-level pilot markets to a national market in 2017: once operational, the Chinese ETS will bypass the EU’s market as the largest in the world. The ICAP report also looks carefully at new efforts in North America, Latin America and the Caribbean, and greater Asia Pacific region.

On the carbon tax front, Canadian province British Columbia has applied a carbon tax to fossil fuel consumption in the province since 2008.  Currently, voters in Washington State are considering a ballot measure that would make it the first U.S. state to do the same. Over 350,000 Washington residents signed on to the initiative, which (similar to BC) would be a “revenue neutral” tax that would result in other state taxes being lowered.  South Africa is in the process of revising a carbon tax bill proposed last November, which is likely to be implemented in January 2017.

UPDATE:  On March 3, all ten Canadian province premiers will meet with Prime Minster Justin Trudeau to discuss a national carbon tax. Alberta Premier Rachel Notley supports a carbon tax while her peers from Manitoba and Saskatchewan oppose it.  Interestingly, the Ontario and Quebec premiers also oppose a national carbon tax, presumably due to their existing regional carbon pricing schemes.  A collection of energy sector business leaders, banks, unions, think tanks, and environmental groups have weighed in to support it.