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A new report today by the High-Level Commission on Carbon Pricing and Competitiveness— comprising CEOs and senior executives from leading global companies, as well as former high-level government officials and representatives from academia—calls on industry peers and governments to adopt strong carbon pricing policies. As more businesses develop low-carbon strategies, supportive government policies can act in tandem to unlock economic opportunities and manage competitiveness concerns.
“Bold and immediate commitment is needed to respond to the challenge of climate change. Carbon pricing is an effective response especially when coupled with other policies. It can result in remarkable opportunities for corporations, countries, and communities,” said Anand Mahindra, Chairman, Mahindra Group.
Carbon pricing is a flexible and low-cost approach to reduce greenhouse gases. Carbon pricing, along with other policies, such as increased investment in low-carbon technologies, can drive innovation in industries and foster continuous process improvement. Taken together, these policies will facilitate the transition to a low-carbon economy, even in highly emissions-intensive and trade-exposed sectors.
“Carbon pricing has proven to be one of the most effective tools to unlock the potential from the private sector to support innovation and low-carbon growth. Carbon pricing is only one of many elements determining global competitiveness and plays a smaller role than other factors, for instance, labor and infrastructure,” said Feike Sijbesma, CEO, DSM.
The report finds a wealth of experience on how other policies, such as lowering other corporate taxes and providing technology innovation assistance to emerging industries, can support carbon pricing and alleviate competitiveness concerns. It finds that other variables—such as corporate tax rates, energy prices, wage rates, labor availability, infrastructure, geographic location, cost of capital, exchange rates, commodities and materials prices—have as large an impact as carbon pricing does on most industry decisions to locate or invest. Furthermore, early evidence from advanced economies shows that putting a price on carbon pollution does not curtail industrial growth or prompt polluters to move to countries that do not charge such a price.
Additionally, carbon pricing can be advantageous for low-emitting firms and has the potential to boost new industries and advance innovation in existing ones. For example, after British Columbia introduced a carbon tax, a new clean technology sector emerged, comprising over 200 companies collectively generating $1.7b annually.
Other jurisdictions have also been successful at managing the impact of carbon prices on international competitiveness for high-emitting and trade-exposed sectors. Some examples include:
- Sweden’s carbon tax, which is the highest in the world at kr1173/tCO2e (US$127/tCO2e) was accompanied by policies to deliver a significant reduction in the marginal tax rates on energy, capital, and labor. According to Sweden’s Ministry of Finance, during the 1990-2015 period, Sweden’s GDP increased by 75%, while GHG emissions went down 26%.
- California successfully enacted a carbon price and other measures that addressed sector-specific competitiveness concerns, despite the fact that its electricity grid is connected to several states that do not have a carbon price. The state used border adjustment measures to address specific competitiveness, requiring electricity imported from border states to obtain emissions allowances, thus leveling the playing field.
The report has received broad support and endorsements from businesses community, including over 80 international companies with several from WEF CEO Climate Leaders Alliance and influential organizations such as WBCSD, We Mean Business, and ICC. The full list of endorsing companies is below, and additional endorsers will be added to the CPLC website.
To watch the livestream of the launch event, download the report, and see additional endorsers, visit: www.carbonpricingleadership.org/competitiveness
