Carbon Pricing & Climate Income
The worst affected communities at the frontlines of climate change are often the least responsible for carbon emissions. Yet extreme weather events are taking thousands of lives, devastating livelihoods and properties and wiping out dreams and aspirations of millions with the least resources. By putting a price on carbon, with the “Polluter Pays” principle, society can hold emitters responsible for the cost of atmospheric pollution from emissions including polluted air, warming temperatures, and consequent hazards like threats to public health, food and water supplies, increased extreme weather events.
Carbon pricing is an approach that helps in reducing GHG (Green House Gases) emissions that uses market mechanisms to pass the cost of these emissions onto the emitters themselves. On a broader aspect, the goal is to discourage the use of carbon-dioxide emitting fossil fuels in order to protect the environment, address the causes of climate change, and meet national and international climate agreements.
The Group of Seven (G7) summit 2022 ended with the declaration of a new inclusive climate club initiative, which was also endorsed by the G7–2022 partner countries including India. Significantly, all the representative groups that engaged within the G7 including business, civil society, science, think tank, women and youth had carbon pricing or redirecting financial flows in their key climate demands. Earlier, an open call was made to all the G7 leaders in the form of a press release entitled, ‘Flipping the Switch.’ From over 400 CEOs, who comprise the Sustainable Markets Initiative offered three critical areas for climate action; the first one is to establish a meaningful carbon price and effective carbon markets.
A study on Nature published in November 2021 reported that it will be possible to reach a 2 degree celsius target, while also increasing wellbeing, reducing inequality, and alleviating poverty, globally, if countries enacted a carbon fee with an equal per capita dividend policy. Thus, with a few more policies in play, in addition to carbon fees with the dividends, the goal of 1.5 degree celsius could be reached, while reducing inequality at the same time.
This year, Canada became the first country in the world to issue direct payments back to its citizens from the pollution fee levied on carbon-based fuels. Starting on July 15th, residents of Ontario, Manitoba, Saskatchewan and Alberta provinces received the first quarterly Climate Action Initiative payments. This is groundbreaking for Canada and the entire world, and for the economies of the Global South to have a working model for reference in planning for a just transition. Canada’s approach to pollution pricing is not only one of the best ways to fight climate change, it also helps in putting the money back in the pockets of those at the frontlines of these impacts.
Climate Income is the policy that climate scientists and economists alike say is the best step (to start with) to reduce the likelihood of catastrophic climate change from global warming. A statement of support for climate income, also called “carbon fee and dividend” or “carbon dividends” was signed by more than 3,000 economists, including 28 Nobel Laureates, 4 former Chairs of the Federal Reserve, and 15 former Chairs of the Council of Economic Advisors.
Carbon pricing has the potential to decarbonize the world’s economic activity by changing the behavior of the consumers, businesses, and investors, while unleashing technological innovation and generating revenues that can be put to productive use. Climate income holds promise to help countries align policies and drive climate-smart innovation and transformation, while addressing food security and affordability issues, either directly or in concert with other non-market approaches.
About the Author:
Rituraj Phukan is an environmental writer, adventurer & naturalist based out of Assam. He serves as the National Coordinator for Biodiversity, Climate Reality India and is a member of the IUCN.
