Research calls for carbon pricing to incentivise higher GHG productivity throughout global value chains
For carbon pricing to cost-effectively support decarbonisation, it is essential to incentivise higher GHG productivity throughout global value chains. This is one of the findings presented by Ecofys and The Generation Foundation at the UN climate summit today. The study is the first released under the Carbon Pricing Unlocked partnership.
Contrary to the common practice of taking a “vertical” view through a specific jurisdiction or sector, the study provides a “horizontal” perspective on how carbon pricing affects global value chains across regions and sectors. In that, the team analysed GHG productivity: the ratio between the economic value created and the GHG emissions along each stage in global value chains. The results are presented in the form of a global GHG productivity map.
Assuming that carbon pricing revenues are redistributed into the economy in proportion to the value created, the experts also calculated the impact that global carbon price could have on consumer prices. Based on these insights, implications for carbon pricing design are derived.
With governments aiming to avoid negative impacts on industrial competiveness, the carbon price is not always passed through in the value chain. The horizontal lens applied in the research, however, reveals the need to incentivise higher GHG productivity throughout global value chains.
Possible examples include a GHG consumption charge based on the material content of consumer goods, a carbon added tax or globally applied sectoral carbon pricing approaches for key industrial commodities.
Find further findings and infographics in the report.