By David Michael Terungwa
Never before has the need to bring carbon pricing to the fore in climate change discourse in Africa been more urgent than now. As global leaders, representatives of governments from developed and developing countries, regional and global institutions, business, civil society, inter-governmental bodies and a host of other climate stakeholders, are pushing forward and setting agenda for carbon pricing policies, it is becoming increasingly expedient for African nations to actively engage and participate, so that the continent will not be left behind.
In the official communiqué issued at the end of the recently concluded meeting of finance ministers and central bank governors of the world’s 20 major economies (G20), which was held in the Italian city of Venice, carbon pricing was acknowledged as a potential tool to address climate change for the first time, thereby taking a tentative step towards promoting the idea and coordinating carbon reduction policies.
According to the communiqué, such tools include investing in sustainable infrastructure and new technologies to promote decarbonization and clean energy, “including the rationalisation and phasing-out of inefficient fossil fuel subsidies that encourage wasteful consumption and, if appropriate, the use of carbon pricing mechanisms and incentives, while providing targeted support for the poorest and the most vulnerable.” The move marked a massive shift from the previous four years when former U.S. President Donald Trump’s administration routinely opposed the mention of climate change as a global risk in such international statements.
Similarly, the International Monetary Fund (IMF) has proposed to set up an international carbon price floor to help limit global warming and achieve the transition toward low carbon growth over the next decade. The Fund noted that gradually increasing price on carbon encourages innovation and transition to renewable energy, clean mobility, and low carbon technologies.
IMF Managing Director, Kristalina Georgieva who disclosed this recently, said the proposed price floor would be focused on a small number of large emitters, such as some or all G20 countries, the agreement would be anchored on a minimum carbon price, a single, efficient parameter that would allow ‘simultaneous action’ across different countries, adding that the a carbon price floor agreement would be ‘flexible, pragmatic and equitable’ and account for different responsibilities across countries with different pricing based on different levels and historical emissions.
She also noted that there has been progress, with over 60 national and subnational carbon pricing schemes around the world. “Limiting global warming to 1.5 to 2 degrees will require emissions to be cut by a quarter to a half by 2030, and this is unlikely to happen without measures equivalent to a global carbon price of around $75 per ton by the end of this decade. Meanwhile, the current global average emission price is only $3 per ton”, she added.
On its part, the European Union (EU), through its Carbon Border Adjustment Mechanism (CBAM) has pledged to impose levies on the carbon content of imported goods in an effort to discourage ‘carbon leakage’, the transfer of production to countries with less onerous emission restrictions.
Also in its “State and Trends of Carbon Pricing 2019 Report”, the World Bank analyzed 57 Carbon Pricing Initiatives. The report provided an overview of existing and emerging carbon pricing instruments and examined trends regarding their development and implementation as well as the way in which they could advance long-term mitigation goals. It also discovered that while carbon pricing policies continue making advances, coverage and price levels remain insufficient to meet the goal the goals of the Paris Agreement on climate change, with only around 20 percent of global emissions covered by regional, national and subnational carbon pricing initiatives and less than 5 percent priced at a level consistent with achieving global temperature goals.
Notably, the report equally appraised new carbon pricing initiatives in the past year, mostly at the subnational level and in the Americas, including in Canadian provinces and territories, driven by Canada’s federal carbon pricing approach, and in Argentina, South Africa and Singapore. It also noted that Colombia, Mexico, the Netherlands, Senegal, Ukraine and Viet Nam are exploring new or complementary policies. In addition, the World Bank has been working with several partners in Africa to explore carbon pricing opportunities. Through the Coalition for the Leadership on Carbon Pricing (CPLC), steps have been taken in this regard in collaboration with national governments, the private sector, civil society and local authorities.
The Director General of World Trade Organisation (WTO) and Co-chair of the Global Commission on the Economy and Climate, Dr. Ngozi Okonjo-Iwaela has urged climate stakeholder, particularly during deliberations at the Carbon Pricing Leadership Coalition’s High-Level Assembly, to focus more on how carbon pricing can be used to shift investments towards low-carbon and climate-resilient projects, and how carbon pricing can address broader social concerns.
“These issues are salient across the world, in developed and developing countries alike. But developed countries need to set the example, by moving faster and quicker on carbon pricing. That said, African countries can benefit, too. Carbon pricing offers African economies, in particular, a powerful vehicle for delivering on other social and economic priorities.
“I urge African countries to focus on three priorities, and carbon pricing plays a key role in each of them”. First, deliver electricity to those without it. In remote areas of Africa, installing standalone renewables (such as solar home systems) can provide electricity more quickly than connecting to the traditional grid.
“Second, prioritise resilient infrastructure. Mozambique, Malawi, Zimbabwe and Madagascar recently brought home the terrible tragedies that more frequent, more intense storms can cause. For the sake of our lives and our livelihoods, Africa’s new infrastructure, including early warning systems, must be able to withstand a changing climate. In our need lies our opportunity.
“Third, create the conditions for the right investments. A shrinking oil market will deliver shrinking revenues for fossil-fuel rich economies relying on oil exports for growth. As more and more countries and car manufacturers commit to phase out internal combustion engines and switch to electric vehicles, the reality is that their assets could soon be stranded”, she added.
Dr. Okonjo-Iweala noted that revenues generated from carbon prices can help fund governments’ development priorities, adding that carbon pricing shapes decision making well beyond any government’s purview. She added that there are many specific development priorities that Africa must achieve to improve the lives of its people today and in the future.
Carbon pricing, according to her, can facilitate the delivery of all these objectives. The Global Commission on the Economy and Climate co-Chair also observed that putting carbon pricing policies in place now can ensure that African countries are full participants in and drivers of the world’s emerging new climate economy.
In October last year, a webinar with the theme, “Carbon Pricing in Africa: Opportunities for Action at the Territorial Level”, was jointly organized by the United Cities and Local Governments of Africa (UCLG Africa), Coalition for Leadership on Carbon Pricing (CPLC) and Covenant of Mayors for Sub-Saharan Africa (CoM SSA). The meeting contextualized carbon pricing and its goals in relation to sub-national actors in Africa.
David Michael Terungwa is currently the Africa Regional Coordinator of Citizens’ Climate International