At the Davos 2022 conference, key policymakers and industry leaders held talks on how proceeds from a price on carbon pollution can accelerate the shift to a greener, more just and equitable society.
Emphasis was placed on how a carbon price can help create viable carbon markets.
The German government, a G7 member state, has staunchly supported the idea of a minimum carbon price, pushing for a €60 (R1 020) per ton of CO₂ threshold, and carbon pricing could be a crucial way to stimulate investment in technologies and infrastructure to transform industry and cut emissions.
In simpler terms, industries which cannot lower their carbon emissions at source, such as the steel-processing, mining or fossil fuel sectors, can, in theory, purchase carbon offset bonds for R1 020 per ton.
These bonds would help finance reforestation projects, grow conservation areas or invest in carbon-offset technologies such as cleaner fuels and more energy-efficient vehicles, machinery, appliances and carbon sequestration facilities.
Kristy Langerman, a senior lecturer of Environmental Management and Energy Studies at the University of Johannesburg, said in a media interview last year that Eskom emits more than 40% of South Africa’s total CO₂ emissions.
“So, as a result, the CO₂ emissions from Eskom are high. On the order of about 200 million tons a year, which is more than 40% of South Africa’s total CO₂ emissions,” she said.
That means that if Eskom decides to purchase carbon bonds to offset its emissions, it will have to pay R204 billion a year. Considering that Eskom saw an income of R44.8 billion in 2021, this would cost more than four times its annual income.
Strong carbon markets may enable countries to finance climate action, while supporting the most vulnerable members of society. Corporations can voluntarily disclose emissions under corporate emissions standards, the Paris Agreement and the Glasgow Climate Pact.
The Net Zero Tracker, however, found that only a third of the largest companies who have committed themselves to net-zero have implemented transparent low carbon transition plans.
This lack of accountability means some industry players can seriously jeopardise actual climate progress. With the EU and UK already having emissions trading schemes in place, the German government is pushing for a minimum carbon price for countries to be part of the proposed “climate club”. Action from the other G7 members, such as the US, Japan and Canada, is still needed.
With the EU and US already abolishing tariffs on trade in low-carbon steel and aluminium, the transition to carbon emissions in energy-intensive industries could receive a major push if all G7 economies commit.
As major trade partners of many other countries, these tariff incentives could lead to the development of low-carbon industries in other countries.
As G7 leaders come together in the Bavarian Alps to discuss the Russian issue, the food crisis and the climate crisis, they must remember that intensified climate collaboration has the ability to transform societies to be more equitable, healthy, and resilient.
Current Affairs