Going boldly together where few have gone before

Canada and its 29 partners in the Organization for Economic Cooperation & Development (OECD) are being challenged by the Paris-based body to have the political moxy to put carbon taxes in place.

OECD Secretary-General Angel Gurria threw down the gauntlet during a news conference he called to release the Economics of Climate Change Mitigation, an OECD study which is a key element of preparations for the COP15 in Copenhagen in early December.

Among other things, the report urges developed countries to at least double their targets for reducing greenhouse gases and Gurria said it provides the analytical support and economic rationale to help decision-makers at the Copenhagen summit to strike a practicable deal on climate change.

In its report, the OECD says carbon taxes must be part of a broader strategy for Copenhagen. The current average OECD commitment is for a reduction of 8-14 per cent from 1990 levels by 2020, well short of the 25-40 per cent cut the Intergovernmental Panel on Climate Change says is necessary to keep global average temperatures from rising by more than two degrees Celsius.

Calling on OECD member governments to coordinate support for taxes as well as a cap-and-trade approach which would effectively put a price on carbon, the OECD says complaints about costs of carbon taxation are unjustified.

It concedes that a global carbon market would have a four per cent negative effect on global gross domestic product by 2050, but Gurrie pointed out that over the same period, GDP growth is projected to grow by more than 250 per cent.

Gurria said “action to mitigate climate change must be taken at a cost that countries can afford.” That was possible only with “a cost-effective set of policy instruments, with a focus on carbon pricing” applied as broadly as possible to all emission sources. He admitted the unlikelihood of getting a global carbon market overnight but said some countries may need to take the lead despite understandable concerns about their international competitiveness.

He said these first movers also worry about carbon leakage, the risk that emissions reductions in some countries would offset by increases elsewhere. ”Developed countries need to take the lead in reducing emissions, but the most cost-effective way to tackle carbon leakage would be for the largest emitting emerging economies to join them and, later, all developing countries.”