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Wednesday, September 27, 2023

Major investors call for global price on carbon

Ahead of the UN Climate Change Conference COP26 in November 2021 in Glasgow, investors managing more than $6 trillion in assets have called for a coordinated global price on carbon to reach the Paris Agreement goal of limiting global average temperature rise to as close as possible to 1.5 degrees Celsius above pre-industrial levels.

Günther Thallinger
Günther Thallinger, Alliance Chair and Member of the Board of Management, Allianz SE

The call comes from the Net-Zero Asset Owner Alliance, convened by the UN, whose 43 members include some of the world’s biggest pension schemes and insurers. Alliance members are committed to shaping their portfolios to rapidly reduce global greenhouse gas (GHG) emissions and limit global warming to 1.5ºC in a just way that maintains a level international playing field.

“Non-regressive and revenue-neutral carbon-pricing instruments – harmonised across borders – will not only unleash massive investment in renewable power systems globally, but boost sectors from construction to transport, which are in urgent need of transition,” said Günther Thallinger, Member of the Board of Management Allianz SE and Chair of the Net-Zero Asset Owner Alliance. 

The paper proposes principles that will see all countries and regions set clear, legally binding net-zero targets, supported by regulated carbon-pricing measures and interim emissions reduction milestones.

Carbon pricing instruments such as emissions trading schemes or taxes currently in use globally cover just 21% of global greenhouse gas emissions, according to a May report by the World Bank.

Charles Emond, President and CEO of Canadian pension scheme Caisse de dépôt et placement du Québec (CDPQ) said: “A carbon price corridor that provides a clear economic signal as well as more pre-visibility will provide the global environment necessary for companies to make sound investments decisions.”

The group proposes a hybrid model between emissions trading schemes and taxes or levies, with an emphasis on creating a minimum price on carbon that would increase over time. The idea is to give certainty to investors and provide a buffer against price crashes, as well as a maximum price to protect against price spikes. It would also provide stable and reliable incentives for stakeholders to adopt or develop low or zero-emission technology.

Innovative technology is key to raising climate ambition and can help implement countries’ national climate action plans – Nationally Determined Contributions (NDCs) – under the Paris Agreement.

The Alliance is strongly encouraging governments to accelerate Research & Development funding into zero-carbon and carbon-removal technologies, in addition to policies that drive the development and deployment of these solutions at industry scale.

Today’s call for a global price on carbon follows the release ahead of last month’s G7 summit of the 2021 Global Investor Statement to Governments on the Climate Crisis. The statement delivers the strongest-ever investor call for governments to raise their climate ambition and implement meaningful policies, or risk missing out on a massive wave of investment in tackling the climate crisis.

According to the OECD, a price of $147 a tonne is needed by 2030 if the world hopes to reach net-zero carbon emissions by 2050, almost treble the current price in the EU’s Emissions Trading System of around $59 a tonne.

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