The World Economic Forum (WEF) and PwC have jointly released a report examining the potential emissions reduction outcomes resulting from the adoption of the International Monetary Fund's (IMF) proposed international carbon price floor. The price floor consists of three tiers: US$75 per tonne for high-income countries, US$50 per tonne for middle-income countries, and US$25 per tonne for low-income countries. Currently, most countries have either no carbon price or one below US$5 per tonne, with Canada being an exception due to its plan for an exponential carbon price increase from C$10 in 2018 to C$170 per tonne by 2030.
The report outlines ten scenarios illustrating the achievement of the IMF's price floor objectives. It concludes that the implementation of these price floors would result in a global emissions reduction of 12.3% within this decade. The WEF and PwC assert that this reduction should be incremental to the 12% already projected by the United Nations based on Nationally Determined Contributions and any additional climate commitments made during COP26. Moreover, the international carbon price is estimated to cause a global GDP decline of less than 1%, while potentially raising GDP for some countries by up to 3%. Any short-term decline in GDP is expected to be offset over the long term by reduced losses associated with climate crises, such as coastal erosion. Despite calls for a carbon pricing overhaul, progress has been sluggish among nations.
In contrast, as reported by the Carbon Disclosure Project, one-third of large businesses in Europe and Asia are presently utilising an internal carbon price or plan to implement one by 2023. The respective average prices for these internal carbon prices are estimated at approximately US$25 per tonne in Asia and US$28 per tonne in Europe. This indicates a growing trend among businesses to incorporate internal carbon pricing mechanisms, underscoring their commitment to emissions reduction and climate action.
