Carbon pricing has emerged as a key mechanism to reduce greenhouse gas (GHG) emissions, which means that private and public stakeholders are seeking an informed view of how carbon-related price signals can drive global emissions reductions in line with these goals. In 2017, CDP and the We Mean Business Coalition launched the Carbon Pricing Corridors initiative with the aim of enabling large market players to define the carbon prices needed for industry to meet the goals of the Paris Agreement. Many companies and financial institutions are already adapting to this new paradigm by assessing risk within a 2°C constraint and seeking low-carbon opportunities.
The inaugural report was published in May 2017 with a focus on the power sector, considered by some as the foundation of the low-carbon transition. This new report, Carbon Pricing Corridors: The market view 2018, features an update on the power sector a year following the initial inquiry process and a new Corridor for the chemical sector.
Achieving U.S. Emissions Targets with a Carbon Tax provides insight on how incorporating emissions target mechanism into a strong national carbon tax can help ensure intended emission cuts are achieved. This mechanism establishes predictable ways of adapting the carbon pricing program over time to respond to any shortfall in emissions reductions. The report describes a basic two-step process– periodic evaluation of whether emissions reductions are on track to meet targets followed by an adjustment mechanism if reductions are less than anticipated.
This report highlights following points:
Nationally Determined Contributions (NDCs) are a cornerstone of the Paris Agreement on climate change. They set out the actions that countries plan to undertake to achieve the agreement’s objectives, focused on limiting the rise in average global temperatures to well below 2°C, ideally to 1.5 °C.
Renewable energy features prominently in most of these NDCs, confirming that the transition to a renewable energy future has come to be recognised globally as central to addressing climate change. Governments are well underway with implementing the first set of NDCs and will begin to review them in 2018. This entails taking stock of the adequacy of those NDCs to meet the objectives set out in the historic 2015 climate agreement. NDCs will be revised or updated by 2020, and every five years thereafter – with each revision aimed at being more ambitious than the previous one.