Price carbon while maintaining competitiveness to lower emissions and spur innovation

 
The extraction and processing of materials and chemicals used in heavy industry - steel, cement, aluminium, glass, pulp and paper, and petrochemicals - generate high emissions that must be addressed. Carbon prices are often kept very low in order to maintain competitiveness, but carbon prices must rise, which means putting in place effective emissions trading schemes or carbon taxes amongst others.

There are a number of ways to implement carbon pricing, so that it does not hurt firms’ competitiveness and, in turn, catalyses innovation. These include: setting a carbon price floor (preventing the carbon price from going too low to guarantee certain returns), and international co-operation on carbon pricing for all countries or even co-operating globally to set a carbon price within a given industry - such as creating a carbon price for all cement firms globally.

EXPLORE FURTHER

Report: Carbon Pricing and Competitiveness: Are They at Odds? OECD (2019)

Report: The Joint Impact of the European Union Emissions Trading System on Carbon Emissions and Economic Performance OECD (2018)

Report: Improving Economic Efficiency and Climate Mitigation Outcomes through International Co-ordination on Carbon Pricing OECD (2019)