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Europe

Should the EU introduce a carbon 'floor price'?

media FILE PHOTO: A car produces smoke from its exhaust as it pulls away in Guernica October 29,2007. REUTERS/Vincent West (SPAIN) -/File Photo

A Paris-based think tank has urged Brussels to introduce a carbon floor price on emissions to speed up the phase-out from coal. A month after delegates narrowly adopted the Paris rule book in Poland, stakeholders are urging more clarity in how to implement those rules.

"The signal which the price of carbon gives is extremely important in terms of investments in the energy sector," says Edmond Alphandéry, a former French economy minister.

"In Europe, the problem is that the price of carbon is very volatile," he told RFI.

Alphandéry, who served as economy minister in the mid 90s, was speaking after making an impassioned plea for an EU-wide carbon floor price to diplomats in Paris on the success of last month's Cop24 climate conference.

Now that the Paris rulebook has been adopted, he insists that the conversation needs to move forward towards concrete solutions for cutting carbon.

That starts with fixing a price.

"When we created the carbon market, the price of carbon was more than 30 euros per ton. With the financial crisis, it fell to 3 euros per ton and then it went up last year to 25 euros per ton," he says insisting that market volatility is bad for business.

"What I'm saying to the European Commission is 'put a floor of 20 euros', that would send an excellent signal."

EU-level carbon price hits snags

The logic is that if goods and services that produce high carbon emissions are expensive enough, consumers will be put off and emissions will go down.

The EU Commission is reluctant to tax carbon emissions at EU-level, insisting this is the responsibility of national governments.

Another reason may be political. With European elections just around the corner, the commission may be keen to avoid further legislation that populists could use to whip up anti-EU sentiment.

"It's complicated," says Alphandéry. "There's a lot of political pressure, the debate is complicated."

A carbon trading market already exists in Europe since 2005. Sources at the commission stress that their role is to regulate the volume, and not the price of emissions, the latter being "the job of the market."

Yet for Alphandéry, the current EU trading system lacks efficiency: "Without targeting the price, we don't have an efficient device," he reckons.

"Let polluters pay"

Some of the biggest energy companies including France’s EDF and Germany’s E.ON, are also calling for carbon pricing at regional level to speed up the transition to a low-carbon economy.

"If we have some way to let polluters pay and use this money to subsidize innovation, I would be in favour of a carbon floor price," says for his part Valentino Piana, an economist, and one of the authors of last year's report by the Intergovernemental Panel on Climate Change, the IPCC.

"But since, it's very likely that the price of carbon would disproportionately hit the poor and the middle class, provoking a boomerang effect, I'm against it," he told RFI.

So how can ordinary people get involved?

"For ordinary people, all this means is that we now target carbon neutrality, so basically going to zero. And this can be done at a pace of [reducing emissions by] 9 percent per year each year."

In concrete terms, Piana says that to make the rules of the Cop24 relevant to the common man, it starts by adopting a healthy lifestyle.

"What we need to do is reduce our consumption of red meat, be healthy, eat more vegetables, use bikes instread of cars."

None of this is dramatic or earthshattering. That's the point he says: "It's not about giving up happiness or high standards of living, the point of moving forward is to satisfy both these needs," he said.

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