The importance of pricing carbon
UN Climate Change News, 3 June 2019– Today, UN Climate Change Executive Secretary Patricia Espinosa spoke at the high-level conference on international carbon markets organized by the European Commission. She underlined the crucial role of international carbon markets in the global efforts for stabilizing global temperature rise and avoiding runaway climate change. “The right signal from markets can lead to more renewable energy, widely accessible to those who need energy for development,” she said.
Read the full speech here (as prepared for delivery):
I’m pleased to join this discussion about international carbon markets and the central role they play in determining whether or not we achieve our collective climate goals.
My position is unchanging and unequivocal: international carbon markets—ones that put a price on carbon—are absolutely crucial if we’re to have any chance of stabilizing global temperature rise and avoid runaway climate change.
Markets that are well-designed and well-connected.
Markets that support cooperation, with consistent rules underpinned by environmental integrity and in line with sustainable development objectives.
Markets that are transparent and credible.
Markets that provide an ambitious signal to all parts of society and that support the deep, transformative change we urgently need.
Those are the markets we need.
The benefits of having them are clear.
Markets that put a price on carbon encourage efficient ways of reducing emissions and discourage high-carbon options.
And the right signal from markets can lead to more renewable energy, widely accessible to those who need energy for development.
This, in turn, can lead to reduced demand for high carbon-intensive technologies.
It can also lead to greater energy efficiency and increased investment in carbon capture and storage.
Finally, the right signals can also lead to more smart buildings and grids, cleaner cars, new business models and more.
Ladies and gentlemen,
Never have we needed the support of international carbon markets like we do right now.
Current nationally determined contributions (NDCs) under the Paris Agreement are projected to—according to recent estimates—more than double our collective 1.5-degree goal under the Paris Agreement. The negative consequences of this are dire.
If we don’t change course, things are going to get worse. According to the C40 group—a collection of cities leading on climate change:
- By 2050, over 570 low-lying coastal cities will face projected sea level rise by at least 0,5 meters.
- This puts over 800 million people at risk from the impacts of rising seas and storm surges.
- The global economic costs to cities, from rising seas and flooding, could amount to $1 trillion by mid-century.
The good news is that we have the global commitment to change that course—the Paris Agreement.
Thanks to hard work by Parties, and supported by non-State actors, almost complete operational guidance for the implementation of the Paris Agreement was achieved in Katowice.
It launched us into a new era where 2019 has become the year of ambition with respect to implementation—in both action and support.
With new or revised NDCs needed by 2020, we continue to work with Parties to significantly boost their climate ambition.
Non-State actors are also showing increased determination and commitment to achieve a low-emissions future and capture the opportunities associated with doing so.
The momentum is positive and promising. But we need to make the carbon markets a part of that momentum, strengthening the change.
It’s therefore critical that Article 6 is completed by COP25 in Chile. Not next year. Not the year after that. This year. This simply cannot continue unresolved from COP to COP. The world cannot afford it.
One of the reasons things were held up in Katowice was largely because of ongoing debate about how double counting impacts environmental integrity.
Simply put: double counting must be avoided.
Using a single greenhouse gas emission reduction or removal more than once to demonstrate compliance with mitigation targets not only undermines the achievement of our climate objectives, it undermines the credibility of the entire climate regime.
Everyone agrees that this is imperative, but addressing these issues within the specific context of Article 6 has proved challenging.
Challenging—but not impossible.
I urge you to use the rest of 2019 to find solutions, allowing solid rules for carbon markets to finally take shape while retaining environmental integrity under Article 6.
This is needed under the Paris Agreement and this is also needed by others, for example in the related processes that are under consideration in the International Civil Aviation Organization.
Delaying such solutions, or failing to agree, as we all know, would have serious consequences. Here are six of the biggest:
First, it would fragment carbon market action— for private actors and for the business community.
Second, it would undermine the efficiency of action, that would, in turn, limit the potential scale of global action for mitigation.
Third, it would undermine our collective understanding of the effort and achievement from cooperative implementation between Parties.
Fourth it would mean there is no central mechanism under the Paris Agreement to provide access to markets to Parties that do not have the economic or regulatory capacity to access them independently.
Fifth, it would erode confidence in our United Nations cooperative process. Why? Because we would not have done what we all agreed we would do, and what we ratified formally to do at home.
Sixth, and let’s not ignore this issue: a fragmented carbon market—one with many different sets of rules and regulations—is less transparent and has a higher risk that traded mitigation outcomes will be less ambitious and of lower quality.
Instead, we should strive for a transparent, coherent and high-quality approach to carbon markets around the world.
Ladies and gentlemen,
I recognize there was progress made in 2018 on Article 6 negotiations and, specifically, in Katowice.
Parties refined the negotiating texts significantly during the session—they became much clearer, more succinct, and crucially, only the final crunch issues were left as options or brackets.
Thanks to this work in Katowice, we now have a solid understanding about the remaining issues and where solutions are needed.
But the fact remains: those solutions, those compromises, still elude us and the challenge of finding them still remains.
The upcoming June climate discussions in Bonn provide the opportunity to shape those solutions.
It is my hope and expectation that this session will result in Parties agreeing on a next version of the negotiating texts under Article 6, with clearer and more concise options for solutions on the outstanding issues.
We are all aware that given the complexity of those remaining issues, Parties must also engage amongst themselves outside the formal sessions and bring acceptable solutions to the formal sessions of the UNFCCC.
I recognize this is already happening and it’s encouraging. This meeting is a good example—I thank the European Union for organizing it.
I’m confident that the discussions here and throughout the year will help us identify the solutions that we need to deliver at COP25 in Santiago.
I want to end by saying that I’m well aware that many Parties have specific but divergent positions on Article 6 issues.
Yet, we need agreements on issues that are supported by all Parties, not just most. I recognize this is challenging. I have been a part of negotiations for many years. I know just how hard it can be.
But, given the critical nature of cooperative implementation for ambition and action, I urge you all to engage, and to make sure that we come to a consensus in Santiago.
This is not the first time that we need consensus of difficult issues—we have managed to find solutions in the past, and it is achievable also this time and for this case.
In the end, we are all working toward the same goal: stabilizing global temperature rise at 1.5 degrees. If we fail to collectively achieve that goal, we collectively suffer.
Ladies and gentlemen,
It’s time to show the political will that’s needed. It’s time to make the tough decisions. It’s time for results.
I urge all of you to show the willingness, the fortitude, the effort and the creativity that you all have shown before to make this happen.
Thank you.