A significant rise in carbon pricing is needed to achieve the goal of limiting the rise in global temperatures to within 1.5 degrees Celsius (2.7 degrees Fahrenheit), according to a report by consultancy Wood Mackenzie.
Global average temperatures are currently 1.2 degrees Celsius (2.16 degrees Fahrenheit) above pre-industrial levels. Limiting the rise to 1.5 degrees Celsius (2.7 degrees Fahrenheit) would not be possible without rapid and sustained action, the consultancy said on Thursday.
The Paris climate agreement, adopted by almost 200 nations in 2015, set a goal of limiting warming to “well below” a rise of two degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial times while “pursuing efforts” for the tougher 1.5 degree Celsius goal (2.7 degrees Fahrenheit).
“To be on a 1.5-degree pathway, carbon support prices will need to reach $160 per tonne of carbon dioxide by 2030,” said Wood Mackenzie’s Asia Pacific head of markets and transitions Prakash Sharma.
As of the end of last year, the global average carbon price across various regimes stood at $22 per tonne of carbon dioxide, he said.
The industrialised world has been spewing carbon dioxide and other greenhouse gases faster than they can be contained for centuries. To rein in temperatures below 1.5 degrees Celsius (2.7 degrees Fahrenheit) – as pledged by countries in the Paris Agreement – governments have been trying to cut emissions through what is known as carbon pricing, an approach that imposes a tax on carbon dioxide emitted or creates a market to trade permits to pollute.
While fossil fuel CO2 emissions dropped 7 percent last year due to the coronavirus pandemic, the world must replicate similar declines every year throughout the 2020s and beyond or else face increasingly dire environmental consequences, according to an analysis published in the journal Nature Climate Change.
The price of carbon permits has recently climbed to a record in Europe amid speculative buying and efforts by policymakers to lower emissions but Asian nations have lagged behind. Japan is considering revising its carbon tax, which is one of the lowest in the world. In China, online carbon trading is set to begin by the end of June.
Governments around the world need carbon policies that focus on hard-to-abate industries, for instance, by facilitating low-carbon hydrogen production, Wood Mackenzie said.
Industries such as heavy industry and transport are considered hard to abate because of the cost and upheaval of transitioning to electrification.
Policymakers could also combine techniques such as carbon, capture and storage (CCS) and direct air capture with other measures to help reduce carbon emissions, the consultancy said.
To limit the rise of global average temperatures to 1.5 degrees Celsius, $50 trillion is the minimum capital expenditure needed, said Wood Mackenzie’s Americas head of markets and transitions David Brown.
Of that, “$27 trillion will come from new power capacity, energy storage, electrolysers and CCS deployments through to 2050, while $23 trillion is required to cover associated infrastructure, battery metals and hydrocarbons,” he said.