Barcelona: Setting a Course to Low-carbon Prosperity

After Climate Week in Paris and before the global climate negotiations started up again in Bonn, Barcelona hosted the Carbon Expo, which is part trade fair and part high-stakes policy shop. King Felipe VI of Spain attended the opening and said it was the most important event of this year aside from the COP21, which opens November 30 in Paris. The event was an important bridge between the ambitious announcements of Climate Week Paris and the Bonn negotiations, on which the future of the world actually depends. 

The bold commitments made during Climate Week must now be translated into concrete actions, established in a text being written by 196 countries. Barcelona was an opportunity to bridge these two ways of planning the future. Integral to the Carbon Expo is the question of how to structure a policy environment that will reveal the hidden costs of burning carbon-based fuels in the actual market price—how to price carbon. 

 The shorthand for what was under discussion in Barcelona (as in Paris and now Bonn) is decarbonization: how to build a prosperous society that no longer requires carbon-emitting fuels. So, we heard about technological options, about trading schemes, and about ways to set a clear and steadily rising price on carbon emissions, by volume.

We spoke about a vision of oil companies who retain the word oil, but whose operations have long since left oil behind, and where the word simply suggests “long-time energy pioneers”. 

On May 28, there was a meeting of non-profits, businesses, governments, and multilateral organizations, to discuss the best way to implement an effective, efficient, transparent carbon price. The talk in the room was that no country’s national climate plan (called an INDC in the negotiating process) can be considered complete without a price on carbon.

Since nationally determined contributions (NDCs) are supposed to come into legal force no later than 2020, all nations should have a principle-driven, economically efficient, environmentally effective carbon pricing strategy in place no later than 2020. 

This is an innovation, in that it is only in the last few months there has started to be a consensus among policy-makers that 1) this is feasible, and 2) this could be recommended as an outcome from the climate negotiating process.

What was most significant about the meetings in Barcelona, however, was that they were taking place both in support of a stronger global agreement, and also in parallel to that process. The entities from civil society, business, governmental and intergovernmental that met in Barcelona do not need a new global framework to take action; they can move forward in a collaborative way, on the basis of national and subnational strategies. 

The question now is whether the global agreement currently being negotiated will make it easier or more difficult to mobilize carbon fees or market mechanisms.

Without a well-designed, economically efficient carbon price in place, the cost of using carbon-emitting fuels will keep coming at us through the entire marketplace, and through natural systems, increasing rapidly over time, and slowing down progress in all other areas. There is no more cost-effective way to achieve economy-wide climate action.

In 2015, there are four major UN conferences that have the potential to greatly reduce harm and threat to human beings and to natural systems. 

In this year alone, there are major global conferences on:

• Disaster Risk Reduction (March),
• Financing for Development (July),
• the Sustainable Development Goals (September),
• and the UN Framework Convention on Climate Change (December).

Though all of these conferences have detailed agendas, with many important policy details, with diplomatic, political and legal complexities to sort through, they can all benefit from well designed economic instruments that accelerate the pace of climate risk mitigation, eliminating rapidly compounding future costs.

We need to know—as we think about shifting our intentions, shifting our focus, shifting our investments in future activity, and shifting our activities—where the cost will be, and where the opportunity to win an edge against unmanageable cost. 

A carbon price, if designed to optimize value to all people across a market, can show that direction of travel clearly.

The work ahead is to come to an understanding of how to build a fabric of economic instruments, country by country, that is fair, effective and efficient. Such a FEE policy will liberate value that is stalled and stunted by the process of externalization which dominates the world energy sector now. It does not add cost, but rather situates it optimally, so that all players in a given marketplace can make more effective, efficient judgments about what to do, when to do it, and how much future commitment to put into it. 

 The World Bank’s Vice President for Climate, Rachel Kyte, explained that the mobilization of support from businesses, national and subnational governments, and NGOs, for a price on carbon, during the UN Climate Summit on Sept. 23, 2014, has led to the emerging Carbon Pricing Leadership Coalition. She looked ahead to an inclusive process that focuses on what companies are doing, what governments need to do, to get a fair, effective and efficient outcome, with a hard look at macroeconomic outcomes, and the visioning of pathways that can move us from business as usual to a thriving, post-carbon economy. 

 Teresa Ribera, of IDDRI—the sustainable development and international relations institute at Sciences Po—looked to the value of the UNFCCC process wherein 196 nations must put forward their intended, nationally determined contribution to the global climate response (their INDC). She noted that the INDC process is an important lens through which to see how each nation understands its situation and its responsibilities.

It was clear that some developing nations still view putting a price on carbon as the burden of heavy emitting industrialized countries, and look to participate in that process by other means, possibly through the policy arena known as LULUCF: land use, land-use change, and forestry. 

What began to emerge in Barcelona, however, especially when speaking about the FEE paradigm—fair, effective, efficient strategies for revealing the hidden costs of burning carbon-based compounds as fuel—was that any nation without a comparable price on carbon will likely end up lagging behind in the competition for investment in low-carbon alternatives.

In Bonn, the work turns to a complex process of deliberative future-building, that involves:

• editing a 90-page negotiating text in which everyone has likes and dislikes;
• doing this through a process in which 196 countries are the editorial team;
• negotiating an agreement that will have legal force;
• achieving that as an expression of the already ratified UNFCCC;
• establishing what policy framework will make the whole process efficient, effective, fair and transformational.

So, as we left Barcelona last week, the news was: all major stakeholder sectors are moving in the same direction, calling for a clear and steadily strengthening price signal that instructs the wider economic landscape, aiming straight for a transition to low-carbon energy. Whether the topic is carbon pricing, emissions reductions, policy action or global negotiations, we are now firmly into the climate action phase: what we are designing, as a world community, is the rate and rhythm of that action agenda. 

 How quickly we get to a world that no longer emits heat-trapping gases depends on how fair, effective, and efficient, our collaborative strategies are. We can’t leave anyone out. We should make sure that, whatever the economic instrument or policy choice in a given jurisdiction, it covers the entire marketplace and builds value at the human scale, while motivating a rapid shift to resilient, low-carbon prosperity.