In June, Nigeria became the latest country to implement a price on greenhouse gas emissions, on the decade after it first proposed the policy. It ought to happen to be a minute for champagne, balloons and congratulatory words. Yet for many, this was no reason for celebration.
Industry has been said to become 'indignant' and insists the tax will hurt jobs and investment, while environmentalists decry a number of flexibilities that lead to a highly effective tax rate of just $0.43-3.44 per tonne of emissions.
The lengthy process of adoption and criticism from opposing ends from the spectrum illustrates the fragile balanced exercise governments adopting carbon prices must strike between putting in place a highly effective policy and managing potential opposition.
Many, if not most, governments have sought to achieve this through watering down policies enough where they're less – or otherwise whatsoever – effective. A World Bank report released last month suggests that, as the number of carbon pricing schemes is growing each year, nearly all these have prices far below the $40-80/t price the High-Level Commission on Carbon Prices tells us is needed in 2023 to achieve the goals of the Paris Agreement (half are below $10/t). Another review of 17 carbon taxes I led two years ago discovered that just about all included some form of exemptions, reduced rates and rebates.
Proponents of the 'slowly-slowly' approach reason that a weak policy is better than nothing; that adopting the instrument assists in building capacities and set happens for later increases. However this is just credible where you can find concrete intends to increase prices and phase out exemptions and rebates inside a defined time period. All too often, weak policies are accompanied only by vague intentions to examine it as being some time later on.
With only 11 years to completely overhaul our economies and switch this (fuel-guzzling) ship around, such approaches clearly do not pass muster. At best, they risk wasting precious political capital on ineffective policies. At worst, they provide a fig leaf that obscures the lock-in of high-carbon investments for many years to come.
Perhaps most egregiously, this lowest-common-denominator approach to climate policy is dismally uninspiring. It implicitly kow-tows towards the narrative that addressing global warming is bad for business, instead of embracing an image of the rejuvenated economy based on clean energy, green jobs and sustainable transport. Meanwhile, carbon prices that do not actually reduce emissions are easily labelled as “just another tax”. Obviously, building support for ambitious carbon prices is much more easily said than done. However, research my colleague George Marshall of Climate Outreach and that i led this past year shows that three factors might help it succeed.
Firstly, carbon pricing should be a part of a coherent policy package. Without access to reliable trains and buses, charging stations for electric vehicles, and finance for retrofitting buildings, the public will be not able to react to cost increases, resulting in backlash. Complementary policies are required to address these along with other barriers to creating the carbon price work.
Secondly, there must be a practical plan to protect vulnerable groups and be sure a 'just transition' to some low-carbon economy. This can come in the type of direct payments to low-income groups, job training for workers in high-emitting industries, and subsidies for companies and consumers to retrofit factories and houses.
Thirdly, and crucially, governments must have an extensive technique for communicating the carbon price and engaging with stakeholders. Failure to win support for carbon prices are, to some degree, failing of communications. Well-thought-out communications that's built-into policy design can go a long way to winning and keeping support for the policy.
Politicians who follow these principles and dare to create a bold vision of a healthier, happier future, with carbon pricing helping us get there, might be amazed at the support they find.
The time for timidly testing the waters continues to be and gone. Now is the time to swim, or sink.
