OECD: Countries should make carbon pricing the cornerstone of climate policy

A transformation of the global energy system is needed if countries hope to limit climate change to a 2ºC temperature increase from pre-industrial levels. That is the key message of the report ‘Climate and Carbon: Aligning Prices and Policies’, released by the OECD.

OECD Secretary-General, Ángel Gurría, called for a coherent approach to carbon pricing to ensure that price signals sent to consumers, producers and investors alike are consistent and facilitate the gradual phase-out of fossil fuel emissions. “Whatever policy mix we put in place, it has to lead to the complete elimination of emissions to the atmosphere from fossil fuels in the second half of the century,” Mr Gurría said. So, the OECD report says that extending and improving the use of carbon taxes and emissions trading schemes is a necessary first step.

The OECD identifies key elements for developing credible, stable and sustainable carbon pricing mechanisms that can underpin investments in new technologies, as well as in the infrastructure needed to achieve a zero net emission future.

So, to achieve the objective of limiting the average global temperature increase to no more than 2ºC above pre-industrial levels, countries worldwide must take on the responsibility to gradually phase out their emissions of CO2in the second half of this century.

Key issues to consider include:  Put an explicit price on carbon; identify other cost-effective policy instruments that put an implicit price on carbon; review the broader fiscal policy to ensure that it is coherent with stated climate goals; ensure that any regressive impacts of carbon pricing measures are alleviated through complementary measures and that a clear communication strategy is developed to explain them; agree on climate pricing and policy measures today but plan for the long-term to achieve stated climate targets.

 

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