Rethink Energy: The Green Deal and the Future of Climate Policy

IIEA29th September 20204min
This explainer looks back at Professor Ottmar Edenhofer’s recent presentation which is part of the ESB/IIEA REthink Energy Lecture Series.

Author: Luke O’Callaghan-White

5 Takeaways:

1. European climate policy is undergoing a paradigm shift. European policy-makers should review all relevant climate policy instruments including the development of an international carbon price.

2. There are important social concerns that should be considered in the development of a carbon price. Without compensation, carbon pricing can have a significantly regressive impact on the welfare of the economically vulnerable and poor households. Governments should develop plans to ‘recycle’ the revenue generated back into the community directly to address equity concerns.

3. Almost 50% of global emissions have a carbon price of €0 and only 10% of emissions are priced in keeping with the Paris Targets. This is the consequence of not having an effective and reasonably priced international carbon scheme.

4. More robust and substantive dialogue between policy-makers and climate experts at the international level is needed. It will take a global commitment to meet the goals of the Paris Agreement and limit temperature increase to well below 2°C.

5. There is a need for European policy-makers to increase negotiations and deepen cooperation with coal-dependent, less-developed countries. The EU should consider providing financial assistance to assist these countries to facilitate the pursuit of non-carbon pathways.

Summary:

Geraldine Heavey, Executive Director of Enterprise Services, ESB opened proceedings noting the importance of addressing inequalities in the transition to a low-carbon future. Ms Heavey remarked that over 90 years ago, electricity helped to transform Ireland by enabling people to escape hardship and poverty, and that today, it can play an equally transformative role as a catalyst for a low carbon future. However, it is imperative that this energy transition does not leave parts of the population behind. The COVID-19 pandemic, Ms Heavy noted, has shown the importance of electricity in our everyday lives, and stressed that new and developing low-carbon electric technologies cannot become the preserve of the rich.

In his address, Professor Ottmar Edenhofer argued that without a global carbon price, it is not feasible to achieve the targets of the Paris Agreement and the EU’s 2050 ambitions of climate neutrality. He said that there is a paradigm shift taking place in European climate policy and there is an opportunity for the EU to take the global lead of implementing a comprehensive carbon price, given its broad array of ambitious climate targets. Professor Edenhofer referred to a carbon price as a ‘Pigovian Tax’, a reference to 20th Century economist Arthur Cecil Pigou who pioneered the idea of imposing a price or tax on negative externalities such as pollution and carbon dioxide emissions.

Professor Edenhofer reminded the webinar audience of the stark reality that almost 50% of global emissions have a carbon price of €0 and that only 10% of emissions are priced in keeping with the Paris Targets. This is the consequence of not having an effective and reasonably priced international carbon scheme.

Professor Edenhofer recognised that comprehensive carbon price reform at the national, European and international level is an institutionally demanding, yet worthwhile, endeavour. European policy-makers and climate experts, he emphasised, should engage in a more robust and substantive dialogue on this matter. Professor Edenhofer argued that the EU should consider providing financial assistance to assist coal-dependent, less-developed countries in their pursuit of non-carbon pathways. In conclusion, he noted that the time is ripe for a robust, international carbon price to play a fundamental role in the transition to net zero emissions.

Key Slide from Professor Edenhofer’s Presentation:

This slide shows carbon pricing on a global scale. The Y axis shows the effective carbon rate (€/tCO2) while the X axis shows CO2 emissions from energy use. The slide indicates that 50% of emissions the effective carbon price is €0 and that only 10% of emissions are priced at a level consistent with the Paris Agreement 2oC target. This slide also shows that a minimum carbon price range consistent with 2oC in 2020 is between €34-€68.

 

 

The Next REthink Energy Lecture

The next lecture in the REthink Energy Series take place on Tuesday 6 October at 1.00pm. On this occasion, Dr Christina Demski, Deputy Director of the Centre for Climate Change and Social Transformations (CAST) and Niamh Boyle, Founder and Managing Director of The Reputations Agency, will address the important topic of building public support for the energy transition to a low carbon future.

To register for this event, please follow this Zoom link and enter your details:
https://iiea.zoom.us/webinar/register/WN_WzLXPCUYQ6mIWEwm9gZ8lw