Carbon price: what are the challenges?

THE ECO SCAN – To limit global warming, politicians and business leaders are considering increasing the price of carbon, one of the challenges of the Paris climate conference (COP21) which starts next November.

• The “carbon leak”

“What we call ‘carbon leakage’ is the fact that instead of investing in Europe, companies invest outside Europe because the price of carbon is non-existent and therefore the price of production is lower. . However, the result in terms of greenhouse gas emissions is the same except that it is emitted elsewhere, ”points out Alexandre Affre, director of industrial affairs at Business Europe, the European Medef.

Business Europe says it is in favor of a global carbon market to avoid this kind of effect: “The carbon price should be set equally in the countries with which we compete on international markets: China, Japan, United States, India, etc… We sometimes find initiatives but nothing comparable with what is happening in Europe ”

• The trigger level of investments

The European carbon market, ETS in the jargon, aims to bring about a carbon price. “Launched in 2005, it would not have played its role and the price of a tonne of CO2 fluctuates between 5 and 10 euros, whereas it would take, to start reorienting investments, a price around 30 euros per tonne” , says Pascal Canfin, former Minister for Development in Climate: 30 questions to understand the Paris Conference, (Les Petits Matins editions). This is confirmed by a think tank specializing in carbon transition. Matthieu Auzanneau, in charge of economic analysis at the Shift Project, explains: “This award should encourage the low-carbon investments necessary (solar power plants, wind turbines) to achieve the ambitious objectives of the European Union in terms of climate change mitigation. . For example, the displays the so-called “three times twenty” objective: 20% reduction in greenhouse gas emissions, 20% energy savings and 20% renewable energy in the total consumption of energy. All by 2020. “

• Quotas

“The European carbon market covers more than 10,000 installations in the energy and industrial sectors collectively responsible for almost half of the EU’s CO2 emissions. It allows the exchange of CO2 emission quotas allocated free of charge by each State, ”explains Matthieu Auzanneau. Companies then have the option of selling or buying allowances, thus creating a carbon market. Two companies A and B each emit 100,000 tonnes of CO2 per year. The government concedes 95,000 tonnes of emissions to both. For company A, it is more economical to reduce its emissions than to buy an additional allowance, unlike company B. A therefore decides to reduce its emissions by 10,000 tonnes and sell 5,000 tonnes on the market; which offsets the costs of adapting its installation. During this time, B will buy 5000 tonnes from the market. In the end, emissions will have decreased, and the two companies have had the opportunity to choose the solution that was most advantageous to them.

• Global warming

According to the Intergovernmental Panel on Climate Change (IPCC), created by the United Nations, since the start of the industrial era, the planet’s temperature has been at + 0.8 ° C. According to the World Bank, climate change represents the first threat to food security in the coming decades, due to its impact on agricultural yields and the increase in droughts and floods, which will destroy crops. Pascal Canfin warns: “These effects will of course be different depending on the trajectory of temperature change. Beyond an additional 2 ° C, chain reactions will lead to a runaway whose consequences scientists cannot measure ”. The fifth report of the IPCC confirmed it: the Earth is warming up and human activities are the main cause. “By increasing greenhouse gases in the atmosphere, man disrupts this climatic variability”, had already explained Pascale Braconnot, researcher at the CEA / CNRS climate and environmental science laboratory in.

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