COP28: EU, IMF, Zambia call for more ambitious, widespread carbon pricing

OVIEDO, Spain

On the sidelines of the UN climate change conference COP28 on Friday, leaders of the European Union, the International Monetary Fund, Zambia, and the World Bank argued for the urgent need to implement more carbon pricing.

“There is a way to cut emissions while fostering innovation and growth – put a price on carbon,” said European Commission President Ursula von der Leyen in her opening remarks to the meeting. “The message is very clear: If you are polluting, you must pay a price; if you want to avoid the payment, then innovate and decarbonize.”

Just 23% of global emissions are currently covered by carbon pricing, according to a 2023 World Bank report.

Spanish Prime Minister Pedro Sanchez said that the aim was to get at least 60% covered as soon as possible.

Kristalina Georgieva, IMF managing director, said she could not think of a more important topic than carbon pricing.

“Is it possible for us to decarbonize fast enough without pricing carbon? The answer is no,” she said frankly, explaining that without the extra revenue it raises, countries would be forced to take on an unsustainable amount of debt to fund the climate action needed to keep warming below 1.5 degrees Celsius (2.7 degrees Fahrenheit).

She also said that the price of emitting carbon needs to increase quickly. Of the 23% of carbon emissions currently covered by a pricing scheme, the average price to emit a ton of CO2 is $20. She said that needs to increase to $80 per ton to reach 2030 climate targets.

She acknowledged that carbon taxes, while efficient, are often not viable politically. She said the IMF now recommends making carbon pollution more expensive through trade, like the EU, or through regulations that make it more expensive for industries or consumers.

The EU implemented its carbon emissions trading system in 2005. Von der Leyen said that in those 18 years, the bloc has reduced emissions by 40% and raised €175 billion ($190.5 billion) in extra revenue that goes exclusively to climate action, innovation, and supporting developing countries.

Georgieva of the IMF said developed countries should be paying more, while nations with fewer resources could be exempt from mandatory markets.

They also spoke about the importance of carbon credits, which can reward countries for protecting biodiversity or vast forests.

Zambian President Hakainde Hichilema advocated for clear international standards and regulations around the credits to avoid forcing countries to have to “reinvent the wheel” and “waste time.”

He also praised the carbon credit system as a way for less developed countries to get a “fair share” of the capital being used to make the green transition.

Zambia is in the advanced stages of developing a framework to regulate carbon credit activities.

“Finance is not neutral. And signals are needed. We call on stakeholders to join us and help us send a strong political signal to tell the world that carbon markets work for the economy, the people and the planet,” said Spain’s Sanchez during the opening remarks.

According to the World Bank report, carbon pricing has been increasing in recent years. In 2010, just 5% of emissions were covered by a carbon pricing scheme, after major nations like China, Japan and South Korea implemented plans. In September, Indonesia also began trading Co2 emissions credits.

The World Bank report said revenues from carbon taxes and emissions trading systems raised a record $95 billion in 2022.