The Business Case for Carbon Pricing
Governments are increasingly using carbon pricing as a tool to mitigate climate risks. There are two key mechanisms that governments use - carbon tax, and cap-and-trade. Globally, there are currently 57 carbon pricing initiatives which have either been implemented or scheduled for implementation by governments. These cover about 20 percent of global emissions.
Businesses are also increasingly adopting internal carbon pricing to achieve their emissions targets, hedge against carbon regulations, reap cost savings, and demonstrate leadership in sustainability issues. The four common mechanisms for businesses to implement internal carbon pricing are: shadow price, internal carbon fee, implicit fee and internal cap-and-trade. As of 2017, nearly 1,400 companies have disclosed their current practices or plans to use internal carbon pricing.
On 15 March 2019, Temasek organised a discussion by Mr Benedict Chia (Director for Strategic Issues at the National Climate Change Secretariat) and Ms Goh Swee Chen (President of Global Compact Network Singapore) on carbon pricing, as part of the Ecosperity Conversations series.
The session discussed the impacts of climate change and how carbon pricing policies could help mitigate climate risks. An overview of carbon pricing mechanisms and global initiatives to implement carbon pricing by governments and businesses was provided. The speakers also discussed how a carbon tax could support the suite of mitigation outlined in Singapore’s Climate Action Plan, which was launched in 2016 with the aim of reducing greenhouse gas emissions intensity by 36 percent compared to 2005 levels by 2030.
This summary report covers the key topics discussed during the session with additional insights to complement the discussion on the effectiveness of carbon pricing in reducing carbon emissions and best practices for implementation.