Global cap-and-trade plans eyed at local level
Carbon markets and taxes should be front and center as essential policy solutions to harness climate actions, an expert says. And how to implement these practical policies is critical to making the Paris agreement actually happen.
“We have seen many countries are making substantial progress in promoting a carbon trade system,” said Vikram Widge, head of climate and carbon finance at the World Bank Group.
The private sector in China is learning very fast to adapt to the international carbon trade system. China’s financial institutions are also starting to familiarize themselves with the regulations, according to Widge.
The points were made during a panel discussion on Monday at the Center for Global Development in Washington.
Currently, China has seven local pilot emissions plans and had planed a national rollout in 2016, but it has been difficult to integrate the local measures with the lack of transparency over quota allocations and trading prices, leading experts to believe the national plan could be pushed back as far as 2020, according to the Financial Times.
“Putting a price on carbon through either taxes or carbon trade system is the only way to incentivize private sectors and mobilize public sources of finance,” said Vitor Gaspar, director of the IMF’s fiscal affairs department.
Gaspar said, the renewable energy and energy efficiency market could be worth $5.3 trillion, which is the equivalent of 6.5 percent of the global GDP.
Carbon pricing in the form of taxes could be diffi because the agent for implementing the policy is the government in each country, which is domestic scope. As an international financial organization, IMF provides financial analytical tools and suggestions to developing countries like China, according to Gaspar.
By collecting taxes from private sector operations, it can price carbon emissions, which enables companies to predict costs and adjust their investment to lesson carbon emissions.
The governments will use the tax revenue to help companies reduce labor costs and subsidize facilities emitting less carbon, Gaspar said.
Pan Jialiang contributed to this story