Principles for pricing pollution.

We’ve spent a lot of time thinking about how to introduce carbon pricing in a way that is fair and effective, and can gain public support. Whilst we understand that different approaches will work for different countries, we believe that - to be successful - there are four principles that nations’ carbon pricing strategies must adhere to:

1. EQUITY

Those individuals, companies and countries who produce the most pollution should pay the price for doing so, whilst those who cannot afford to pay - such as low-income and fuel poor households - should be shielded from these costs.

2. EFFICACY

Carbon pricing should only be introduced where it can have a tangible impact on emissions reductions; it is not the mechanisms that are key, but their ability to achieve stated environmental goals. For this reason, prices should be aligned to desired environmental outcomes (i.e ‘net zero’ targets), rather than based on estimates of the ‘social cost of carbon’ (SCC).

3. ENABLING A JUST TRANSITION

Where a carbon price is introduced, provision of access to low-carbon alternatives must be prioritised, and supported by ‘green transition’ plans which guarantee job security for those working in high-emitting sectors. The need to enable or exempt ‘permitted’ carbon investments where they are required to facilitate low-carbon development - especially in less developed economies - should also be considered.

4. Form part of a wider approach to climate mitigation

A carbon price alone will not deliver net zero, and as such should form part of a suite of policies and regulations that sit beneath a holistic decarbonisation strategy. Carbon pricing is a necessary but not sufficient condition for achieving net zero.