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Carbon pricing is one of the methods used to incentivize businesses to reduce greenhouse gas emissions — by making them pay for pollution the create. Some governments impose taxes on carbon emissions, while others set up systems where emissions are capped and extra allowances can be bought or sold in the form of “carbon credits.”
According to the International Monetary Fund, the global average carbon price in 2019 was $2 per ton — and Carney said the charges need to be much higher.
That figure is higher than projections by the IMF, which said carbon taxes should be $75 a ton by 2030.
As economies move toward future with net-zero carbon emissions, structural changes will leave some sectors uncompetitive, said Carney, who was previously governor of the Bank of England and the Bank of Canada.
The energy sector, for example, would require decades of investments and support as the transition takes place.
“(It’s) one of the toughest things for governments to do in order to … ensure that the longer term benefits to society are spread more immediately to those who are more impacted,” he said.
However, there are areas of “absolute alignment” between short-term economic benefits and medium-term climate benefits, he added.
“There are certain climate policies that are job heavy, they’re investment heavy, they have high multipliers for GDP,” he said, citing the example of retrofits to make buildings energy efficient.
He also said the investment opportunity in energy is at least $100 trillion over the next few decades.
Still, the world has been not been investing enough to address the climate crisis, Carney said.
One reason is that humans can be “irrationally impatient” and value the present much more than the future.
“The catastrophic impacts of climate change will largely fall on future generations, and the current generation … has few direct incentives to solve it – even though if we act sooner, it will be less costly,” he added.
Decisions have also been made in a utilitarian way, Carney said. “This encourages a trade-off between growth today and crisis tomorrow, between…
Read More: Firms should pay more for pollution, UN special envoy for climate Mark Carney