Climate pact could be basis for CO2 pricing

For the most part, big business wanted one thing from the climate accord in Paris: a price on carbon dioxide (CO2) emissions. While on the surface their hopes were dashed, looking deeper may give them cause for hope.

Multinational companies such as oil giant BP PLC have called for a globally agreed way of pricing emissions of CO2 to create an incentive for power plants and factories to shift to cleaner forms of energy.

That’s opposed by oil exporting countries such as Saudi Arabia as well as others, like Bolivia, reluctant to embrace any market-based solutions.

Saturday’s landmark agreement in Paris included an inelegant reference to what some analysts think could build a bridge to a global CO2 emissions trading mechanism.

The binding part of the deal, for the nearly 200 nations that agreed to it, allows countries to use “internationally transferred mitigation outcomes,” which could allow nations on a voluntary basis to offset their own CO2 emissions by buying credits from other nations.

At some point, analysts said, that might lead to a tie-up between the European Union’s Emissions Trading System ( ETS) and China’s planned trading scheme set to be launched in 2017.

It is unlikely to happen as fast as some business sectors want. But French President François Hollande said he would seek to build a coalition of countries that wanted to pursue a CO2 emissions price.

The Paris agreement’s only direct reference to “carbon pricing” occurred in a nonbinding, political section of the text, where the countries “recognize the important role of providing incentives for emission reduction activities, including tools such as domestic policies and carbon pricing.”

Stronger language would have destroyed a fragile consensus, delegates said.