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Global carbon price most effective policy to combat global warming

A global tax on carbon agreed upon by several countries worldwide was debated by a group of high-level speakers at the virtual event ‘Bending the Emission curve: Sweden’s Climate Opportunities and Responsibilities’ hosted by Misum (Mistra Centre for Sustainable Markets) at Stockholm School of Economics last week.

The debate used the 2020 SNS Economic Policy Council report chaired by Professor John Hassler, at the Institute for International Economic Studies (IIES ) as a point of departure.

A high-stake panel consisting of Anders Ygeman, Swedish Minister for Energy and Digital Development, Jonas Nycander, Professor of Physical Oceanography at Stockholm University, Jessica Rosencrantz, Environment and Climate Policy spokesperson for the Swedish Moderates Party, Dr. Elina Scheja, Lead Economist at Sida, and Jytte Guteland, Member of the European Parliament, Social Democrats discussed multiple pathways for Swedish climate policy to impact global CO2 emissions reduction more ambitiously. Mechanisms included getting an international agreement on a global carbon tax, scaling up exports of climate neutral Swedish products, and diversifying Swedish energy and transport investments.

Prof. John Hassler presented a model where a global carbon tax on coal equivalent to the Swedish carbon tax would keep warming below 2 degrees in the long term.

Anders Ygeman said ‘There is no conflict between working for global emissions reductions whilst also showing the world that we can cut emissions at home whilst also providing welfare. This is a crucial argument for influencing regional goals’.

Jonas Nycander said ‘the greatest obstacle to cost effective global reductions in emissions is due to competition on the international market. If only one country applies a price, then emissions will just move to another country without that cost.’ Nycander continued by outlining that this market behaviour makes it impossible for a single country to put a price on CO2 emissions caused by heavy industry - where the biggest opportunity to reduce emissions lies. ‘This is the opposite of a rational climate policy. The only way to reduce the emissions from heavy industry is to agree to a price internationally.’

Implemented carbon tax

Sweden was one of the first countries to implement a carbon tax in 1991, yet many high polluting countries such as China, US and India are yet to do so. Jessica Rosencrantz, Environment and Climate Policy spokesperson for the Swedish Moderates Party said ‘Swedish climate policy is currently too narrow. We need to level up our ambitions in concrete policy to meet the global climate challenges. Ambitions are good but they can be ignored. For example, we see positive indications from China wanting to work towards climate neutrality, but at the same time China is opening new coal plants.’

Jytte Guteland said: ‘The concept of a carbon tax is a positive one, but it doesn’t have the fast track we would all like it to have due to challenges for different nation states. It would be a successful outcome to be able to have an agreement at COP26.’

Guteland continued that the EU Emissions Trading System (EU ETS) is the flagship in current EU climate law and it has potential to expand its influence beyond the EU. She went on to say that ‘it is important that we don’t make climate reforms that burden low-income groups or households’.

Dr. Elina Scheja commented that ‘with grants we can directly contribute resources into the transitions of poorer development partner countries. Whilst these grants are important, the financial needs are infinitely more than development cooperation grants can provide. Private financing and other financial flows must be mobilized here.’

The panel outlined that investments within Sweden needed to also continue alongside development cooperation investment. ‘Sweden should develop its competitiveness to contribute to reducing international emissions via industry, internationally then we need investments in Sweden as well. Sweden as a major exporting country we should not primarily export money, we should export low carbon goods, services and know-how and that would be our major contribution.’ Said Johan Johan Kuylenstierna, Chair of the Swedish Climate Policy Council.

Note: Bending the global emissions curve: Sweden’s climate policy opportunities and responsibilities was held on 25 May by the Misum at Stockholm School of Economics and moderated by Mia Horn af Rantzien, CEO of the SNS Centre for Business and Policy Studies.

Speakers:

  • Anders Ygeman, Swedish Minister for Energy and Digital Development, Social Democrats Party (S)
    Jessica Rosencrantz, Member of Swedish Parliament (M), Environment and Climate Policy spokesperson for the Moderates Party
  • Jessica Rosencrantz, Member of Swedish Parliament (M), Environment and Climate Policy spokesperson for the Moderates Party
  • Prof. John Hassler, Deputy Director of the Institute for International Economic Studies (IIES)
  • Dr. Elina Scheja, Lead Economist at Sida
  • Jytte Guteland, Member of the European Parliament, Social Democrats, Sweden
  • Prof. Jonas Nycander, Professor of Physical Oceanography at Stockholm University
  • Johan Kuylenstierna, Chair of the Swedish Climate Policy Council, Adjunct Professor at Stockholm University and Mistra Board member
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