LONDON (Reuters) - The cost of emitting carbon dioxide must rise to $50-$100 per tonne by 2030, much higher than the current price in Europe of less than $6, if countries are to meet climate pledges made under the Paris Agreement, economists said on Monday.
It follows a call this month by a group of more than 200 businesses and governments, including oil majors Shell and BP, for a worldwide carbon pricing system to prevent dangerous levels of global warming.
For now, 40 countries, more than 20 cities and some other areas price carbon emissions using taxes or emissions trading systems (ETS). But the schemes only cover about 15 percent of global heat-trapping greenhouse gases, and the businesses say pricing systems need to be extended to the rest of the world.
The Commission on Carbon Prices, a group of 13 leading economists supported by the World Bank, said in their report that carbon dioxide prices would need to be $40-$80 per tonne by 2020, rising to $50-$100 per tonne the following decade.
“If we are going to meet the commitments of Paris, we will have to have prices (at those levels) ... The costs of not doing it will be much higher,” Columbia University Professor Joseph E. Stiglitz, a commission member, told a news briefing.
High prices for carbon dioxide, against which most greenhouse gasses are prices, make it more expensive for firms to emit the pollutants and encourage investment in low carbon technology, such as wind and solar power or energy efficiency measures.
Under the Paris deal, more than 190 countries pledged to keep planet-warming well below 2 degrees Celsius (3.6 degrees Fahrenheit) to stave off the worst effects of climate change.
Prices in Europe’s ETS, the world’s largest carbon market, now trade around 5 euros ($5.60) a tonne and are forecast to average just over 16 euros a tonne from 2021-2030.
Stiglitz said it was reasonable to expect global carbon prices to rise much higher and many firms based investment decision on much higher prices than now. Shell and BP work out the feasibility of projects based on a carbon price of $40.
The commission said carbon pricing needed to be combined with policies to promote energy efficiency, renewable energy and innovation.
While carbon pricing was a good idea for all nations, poorer countries might need to start at a lower level and build to a higher price, the report said.
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Additional reporting by Ron Bousso; Editing by Edmund Blair