Session 4 presentation from the 4th Strategic Dialogue of the Carbon Market, 15-16 May 2019

1. SESSION 4: SUPPORTING
REGIONAL COOPERATION ON
CARBON PRICING
Support climate mitigation outcomes through
international co-ordination on carbon pricing
Dr Simon Buckle
Head of Climate, Biodiversity and Water Division
Environment Directorate, OECD
4th Strategic Dialogue
Carbon Market Platform
Paris, 15-16 May 2019

2. 1. Brief review of findings from past work
a. Why is carbon pricing an essential tool?
b. Why do we not see more of it?
c. How can we overcome barriers to carbon pricing?
2. Potential future work
a. Modelling work
b. National and sub-national actors
3. Process and Timelines
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Outline

3. 3
Carbon pricing is an essential policy tool
Prices a negative externality
Can raise revenue for governments
Can have synergies with other societal objectives
More effective if complemented by other instruments
And international co-ordination can bring
mutual benefits

4. 4
Current prices too low or even zero
Source: OECD (2018): Effective Carbon Rates 2018
53% 47%
Effective carbon rate for Germany 2015
% of CO2 emissions from energy use
Effective
Carbon
Rate
in
EUR
per
tonne
of
CO
2
46% of
emissions
not priced
88% priced
below 30
EUR

5. 5
Overcoming barriers, relaxing the constraints
• International price convergence
• Design of carbon pricing schemes
• Targeted free allocation in ETS
Competitiveness
• Targeted tax exemptions
• Revenue recycling to affected households
• Complementary energy efficiency policies
Households
• Diversifying public revenue sources
• Better financial valuation of climate risk
• Market creation through public procurement
Carbon
Entanglement
• Realigning fiscal incentives
• Fossil fuel subsidies
• Electricity markets, many others
Misalignments
• Best practice sharing
• Technical assistance
• International support
Government
Capacity

6. Broadening
coverage
Increase
price
coherence
Increase
price levels
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Levels of international co-ordination
Fossil fuel subsidy reform
Sectoral approaches
Linking ETS
Crediting mechanism
Internal carbon pricing
New pricing schemes
Minimum carbon prices
Carbon clubs
Global carbon price

7. 1. Modelling of efficiency gains as an input to
regional initiatives that aim to co-ordinate on
carbon pricing
2. Relationship between national and sub-national
mitigation action (synergies and trade-offs)
Potential future work for 2019-20 – two
possible areas
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8. Propose two-staged approach:
I. In 2019: Literature survey and assessment of
existing initiatives to
a. Identify the main factors affecting the economic and
environmental effectiveness of national or sub-national co-
operation
b. The key dimensions of social welfare that could support
enhanced ambition across a number of jurisdictions
c. Agreement on key modelling outputs
II. Spring 2020, decide on possible modelling work,
timing and budget
Item 1: Modelling of efficiency gains
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9. • The proposed work would aim to:
– Identify synergies and trade-offs between sub-national
or non-state actors (NSAs) and national government
actions
– Identify areas where the climate action of NSAs could
help countries to over-achieve their NDC;
– Explore how ambitious sub-national actions could
facilitate and feed into more ambitious NDCs
Item 2: Maximising the contribution of sub-
national climate action to NDCs
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10. 1. Involvement of CMP members (Working Group)
2. Issues to discuss include:
a. Activities
b. Type of meeting
c. Length and frequency
d. Secretariat role and resources
e. Support for dissemination – relationship to CLPC
3. Timing for deliverables?
Process and timelines
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11. • What about the suggested focus,
frequency and mode of working?
• On content and timing, views on:
a. Modelling of efficiency gains?
b. National and sub-national actors?
Possible issues for discussion
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12. Thank you for your attention
simon.buckle@oecd.org
OECD work on carbon pricing:
http://www.oecd.org/tax/tax-policy/tax-and-environment.htm
http://www.oecd.org/site/tadffss/
https://www.oecd.org/env/tools-evaluation/FASTER-carbon-pricing.pdf
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