UN Climate Summit Expected to Show Growing Momentum for Carbon Pricing

By Andrea Vittorio

Sept. 18 — The growing global momentum for carbon pricing in both the public and private sectors will be on full display next week at a United Nations leaders summit on climate change.

Many, including UN Secretary-General Ban Ki-moon, are saying consensus on carbon pricing could be one of the key deliverables from the summit, which will bring more than 120 world leaders together to focus on the issue of climate change amid ongoing negotiations for a 2015 treaty to fight it.

Individual companies, investors, and national and local governments are expected to throw their support behind the idea of putting a price tag on carbon emissions through taxes, emissions trading systems or other schemes. Some companies will even make new commitments to use internal carbon pricing as a way to drive low-carbon investments.

About 40 countries and more than 20 cities, states and provinces have carbon pricing policies or plan to launch them, according to the World Bank. Together, these carbon pricing instruments cover about 12 percent of annual global greenhouse gas emissions.

“For many countries, it's no longer ‘if'; it's a ‘when' conversation,” Jennifer Morgan, director of the climate and energy programs at the World Resources Institute, told Bloomberg BNA Sept. 17.

About 150 of the world's largest companies also have incorporated a price on carbon into their business decisions, according to a report released Sept. 15.

Effort Planned to Seek More Supporters

At the UN Summit, private- and public-sector leaders will seek to add even more names to those lists.

The centerpiece of this effort is a campaign led by the World Bank to gather public statements of support from businesses and national and local governments for pricing carbon.

“What we hope will come from the summit is a fairly big wake-up moment for the rest of the world that this is not niche, this is not extreme,” Rachel Kyte, World Bank Group vice president and special envoy for climate change, told Bloomberg BNA Sept. 18. “This is a very, very fast-moving piece of fundamental economic architecture necessary to reach a 2-degree world, necessary for green growth, jobs and competitiveness.”

So far, more than 230 companies and nearly 30 governments have signed on to the statement, including some that already price carbon today and others that have pledged to do so or are considering it.

There are U.S.-based companies and state or local governments signing the statement, Kyte said. The full list of signatories, which include GDF Suez, Unilever, Ernst & Young and Swiss Re, will be revealed Sept. 22, the day before the UN Climate Summit.

Lesson Sharing Could be Outcome

Kyte said she wants signatories to do more than just voice their support for carbon pricing before the summit.

“I'm hoping after the 23rd that these countries and companies will continue to work together to share the lessons learned, share the objectives in what they're doing, produce that learning and evidence and support so that everybody moves in that direction,” she said.

Some companies will take their commitment to carbon pricing a step further during the UN Private-Sector Forum, which will be held the same day as the leaders summit on climate change.

Nearly 30 companies worldwide are expected to commit to business leadership criteria on carbon pricing developed by several UN bodies in collaboration with The Climate Group, a nonprofit organization that pushes for a low carbon future, and CDP, formerly known as the Carbon Disclosure Project, which works with investors on disclosing their impacts on the environment and natural resources.

Carbon Price Will Vary at Companies

Companies that sign on to the criteria will agree to set an internal carbon price that is high enough to materially affect investment decisions and reduce greenhouse gas emissions. That price level will differ for each company, Lila Karbassi, head of environment and climate at the UN Global Compact, told Bloomberg BNA Sept. 17.

“It's up to them to show why their price is high enough,” she said. “What influence did it have on their future investments? How did it help decarbonize their operations? That's why we left it open to the companies to determine the price.”

Corporate carbon prices range from $6 per ton to almost $90 per ton, according to the CDP report.

Companies also are pledging to publicly advocate for carbon pricing through “policy mechanisms that take into account country specific economies and policy contexts,” according to the criteria.

Another element of the criteria is for companies to be “accountable and transparent” about their carbon pricing efforts in corporate reports, Karbassi said.

Canadian, Chinese Companies Are Signatories

Canadian solar power company SkyPower Global and China's State Grid Corp. are among the signatories to the criteria set to be announced Sept. 23. No U.S.-based companies have agreed to the criteria, but Karbassi said she hopes more companies will sign up later.

U.S. companies are likely reluctant to sign on because carbon pricing hasn't been part of the national debate since Congress failed to pass cap-and-trade legislation in 2010, Morgan said

Ahead of the summit, almost 350 institutional investors representing more than $24 trillion in assets are issuing their own call for government leaders to provide a “stable, reliable and economically meaningful” carbon price that helps redirect their investments away from fossil fuels and toward clean energy and climate solutions.

The California Public Employees' Retirement System (CalPERS) and fund manager BlackRock are among the signatories of the new global investor statement on climate change. In addition to calling for a price on carbon, the statement asks governments to phase out fossil fuel subsidies and strengthen regulatory support for energy efficiency and renewable energy.

CalPERS: Market Failure Needs Addressing

“The reason we are coming together is simple: There's a market failure that needs to be addressed, that is that carbon is not priced,” Anne Simpson, CalPERS' senior portfolio manager and director of global governance, said on a conference call Sept. 18.

Putting a price on carbon would provide a signal to capital markets to invest more in clean energy, Mindy Lubber, president of sustainability advocacy group Ceres, told Bloomberg BNA Sept. 17.

Ceres' Investor Network on Climate Risk is one of four investor groups coordinating the global statement on climate change, along with the United Nations Environment Program‘s Finance Initiative (UNEP FI) and Principles for Responsible Investment (PRI).

Inflection Point

The finance sector—including banks, insurance companies, pension funds, endowments and others—already is starting to put more money into clean energy through green bonds and a range of other tools, according to a report released by the investor groups on Sept. 18.

“We are here at a real point of inflection where the biggest and most powerful institutions in investment are saying we need a change and are demonstrating that they can bring about change,” David Pitt-Watson, chair of the UNEP FI, said on the conference call.

In 2013, clean energy investment totaled $254 billion worldwide, according to the Pew Charitable Trusts.

But much more clean energy investment is needed if the world is to avoid the worst impacts of climate change, according to the International Energy Agency. IEA estimates that limiting global warming to 2 degrees Celsius would require investing an additional $1 trillion annually in clean energy by 2050.

“What's going to be transformative is when you put a price signal in place,” Lubber said. Though Lubber said she doesn't expect the price of carbon to be decided next week, she hopes there is at least “a heightened debate on a price on carbon.”

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com