Which price(s) for carbon ?

21 December 2016 - Foreword of the week - By : Benoît LEGUET

On December 1^st, 2016, Benoît Leguet concluded the “Défi Climat” session entitled “Which price(s) for carbon?”. Benoît’s speech was devoted to the social value of carbon, as defined in the Paris Agreement, and its links to the price(s) of carbon.

In summary of this speech, consider the following four ideas that justify the need to define a “confidence interval” of social carbon values consistent with the net-zero objective set by the Paris Agreement:

1. Carbon Price signals are necessary but insufficient. There are many obstacles to move forward a low-carbon economy:

Carbon prices rather than one carbon price to take account of national and sectoral circumstances and dynamics.
Need for strong political signals to avoid ending up in technological and economic “dead ends”.

2. Decarbonising our economy in the short term according to optimal economic choices depends on the long-term objective and speed of implementation

Targeting more expensive low-carbon investment options now makes sense: reasoning on average and non-marginal abatement costs.

3. Policy-makers and economic players need a carbon value “compass” to guide investment decisions:

Role of the social value of carbon to make the policy framework more coherent and effective
Towards an operational declination of this carbon social value (states, communities, companies …).

4. To meet this need, a “confidence interval” for carbon values should be institutionalized to coordinate short-term decisions towards the end point of the low-carbon transition.

The Stern-Stiglitz Commission, launched in November 2016, will deliver the first recommendations expected in April 2017

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Benoît LEGUET

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