2018 Nobel Economics prize winner William Nordhaus has called on governments at the UN climate conference in Poland to rethink their approach to fighting climate change. He argues that there isn’t enough consensus or political will for a voluntary agreement to succeed and suggests that delegates at COP24 focus on a carbon price.
Nordhaus suggests setting a carbon price of around $40 to $50 a tonne and then letting countries decide how they want to implement it with possible options being a carbon tax or a cap and trade arrangement.
I don’t know what the right price would be, but I do agree that a globally applied carbon price would be the most effective way to bring about the changes that we need. The International Council on Mining and Metals (ICMM) has been an advocate of carbon pricing since 2011, and our position is that “We support a price on carbon, and other market mechanisms that drive reduction of greenhouse gas emissions and incentivise innovation”.
Currently around 70 countries or regions already apply some form of carbon price. But this only covers about 20% of global total emissions. To work more effectively and fairly, carbon pricing would need to be applied more widely. Carbon pricing, implemented on a level playing field basis and in a predictable and measured way, would incentivise more emission reductions by industry, such as reducing emissions by switching to renewable energy, using less carbon intensive fuels and through process efficiency improvements.
Mining will play a vital role in producing the copper, cobalt, lithium and steel required to decarbonise the global economy. While many mining companies are already reducing their carbon emissions whether they operate in carbon pricing jurisdictions or not, governments too need to show leadership to incentivise all businesses to cut emissions faster.
Sir David Attenborough in his address to COP24 told delegates that time is running out and four former UN climate talks presidents issued a statement saying that "decisive action in the next two years will be crucial". I hope that William Nordhaus’s proposal will be a part of such decisive action.