Never before has the need to bring carbon pricing to the fore in climate change discourse in Bangladesh been more urgent than now. A carbon fee and dividend or climate income is a system that imposes a fee on the carbon content of fossil fuels at the point of entry into the economy.
।। Mohammad Galib Hossain।।
Bangladesh is one of the most vulnerable countries in the world to the effects of climate change, which poses a significant risk to the economic development of the country. According to Global Climate Risk Index 2021 of German Watch, Bangladesh is the 7th most vulnerable country of the world in the period 2000 to 2019 due to climate change impact.
Never before has the need to bring carbon pricing to the fore in climate change discourse in Bangladesh been more urgent than now. As global leaders, representatives of governments from developed and developing countries, regional and global institutions, business, civil society, inter-governmental bodies and a host of other climate stakeholders, are pushing forward and setting agenda for carbon pricing policies.
In the official communique issued at the end of the recently concluded meeting of the finance ministers and central bank governors of the world’s 20 major economies (G20), which was held in the Italian city of Venice, carbon pricing was acknowledged as a potential tool to address climate change for the first time, thereby taking a tentative step towards promoting the idea and coordinating carbon reduction policies.
According to the communique, such tools include investing in sustainable infrastructure and new technologies to promote decarbonization and clean energy, “including the rationalization and phasing-out of inefficient fossil fuel subsidies that encourage wasteful consumption and, if appropriate, the use of carbon pricing mechanisms and incentives, while providing targeted support for the poorest and the most vulnerable.”
Similarly, the International Monetary Fund (IMF) has proposed to set up an international carbon price floor to help limit global warming and achieve the transition towards low carbon growth over the next decade. IMF noted that gradually increasing price on carbon encourages innovation and transition to renewable energy, clean mobility, and low carbon technologies.
IMF Managing Director, Kristalina Georgieva who disclosed this recently, said the proposed price floor would be focused on a small number of large emitters, such as some or all G20 countries, the agreement would be anchored on a minimum carbon price, a single, efficient parameter that would allow ‘simultaneous action’ across different countries, adding that the a carbon price floor agreement would be ‘flexible, pragmatic and equitable’ and account for different responsibilities across countries with different pricing based on different levels and historical emissions.
She also noted that there has been progress, with over 60 national and subnational carbon pricing schemes around the world. “Limiting global warming to 1.5 to 2 degrees will require emissions to be cut by a quarter to a half by 2030, and this is unlikely to happen without measures equivalent to a global carbon price of around $75 per ton by the end of this decade. Meanwhile, the current global average emission price is only $3 per ton”, she added.
On its part, the European Union (EU), through its Carbon Border Adjustment Mechanism (CBAM) has pledged to impose levies on the carbon content of imported goods in an effort to discourage ‘carbon leakage’, the transfer of production to countries with less onerous emission restrictions.
Also, in its “State and Trends of Carbon Pricing 2019 Report”, the World Bank analyzed 57 Carbon Pricing Initiatives. The report provided an overview of existing and emerging carbon pricing instruments and examined trends regarding their development and implementation as well as the way in which they could advance long-term mitigation goals. It also discovered that while carbon pricing policies continue making advances, coverage and price levels remain insufficient to meet the goal of the Paris Agreement on climate change, with only around 20 percent of global emissions covered by regional, national and subnational carbon pricing initiatives and less than 5 percent priced at a level consistent with achieving global temperature goals.
Notably, the report equally appraised new carbon pricing initiatives in the past year, mostly at the subnational level and in the Americas, including in Canadian provinces and territories, driven by Canada’s federal carbon pricing approach, and in Argentina, South Africa and Singapore. It also noted that Colombia, Mexico, the Netherlands, Senegal, Ukraine and Viet Nam are exploring new or complementary policies.
The Director General of World Trade Organization (WTO) and Co-chair of the Global Commission on the Economy and Climate, Dr. Ngozi Okonjo-Iwaela has urged climate stakeholder, particularly during deliberations at the Carbon Pricing Leadership Coalition’s High-Level Assembly to focus more on how carbon pricing can be used to shift investments towards low-carbon and climate-resilient projects, and how carbon pricing can address broader social concerns.
“These issues are salient across the world, in developed and developing countries alike. But developed countries need to set the example, by moving faster and quicker on carbon pricing. That said, developing countries can benefit, too.
Also, create the conditions for the right investments. A shrinking oil market will deliver shrinking revenues for fossil-fuel rich economies relying on oil exports for growth. As more and more countries and car manufacturers commit to phase out internal combustion engines and switch to electric vehicles, the reality is that their assets could soon be stranded”, she added.
Bangladesh should look the way of carbon fee and dividend or climate income as a carbon pricing instrument as best suited for the country to alleviate poverty and help build resilience. A carbon fee and dividend or climate income is a system that imposes a fee on the carbon content of fossil fuels at the point of entry into the economy.
The revenue from the carbon fee may be used to finance clean energy and energy saving projects, for social and economic development, including infrastructure investment. But Bangladesh can learn how other countries have succeeded.
The writer, an expert in the areas of environmental management systems with over 20 years of professional experience, is International Coordinator, Citizen’s Climate International (Bangladesh).
