The International Energy Agency has determined that for greenhouse gas emissions to be reduced to the level recommended by the Intergovernmental Panel on Climate Change (and some contend that report was too conservative), carbon prices would need to be $200 a ton, more than four time the price now in effect for the EU carbon trading scheme.
From the Financial Times:
The cost of carbon dioxide emissions would need to be at least $200 per tonne – many times today’s levels – to deliver the cuts proposed by scientists to avert the threat of global warming, the International Energy Agency said on Friday.
The rich countries’ energy watchdog warned that the cost of emissions, set by trading schemes or carbon taxes, would need to be that high to make investment in technologies such as hydrogen-fuelled vehicles commercially viable….
Nobuo Tanaka, IEA executive director, said the world needed a “technology revolution” to halve greenhouse gas emissions by 2050, which would “completely transform the way we produce and use energy”.
“If we really go to the 50 per cent reduction, costs are going to be very steep,” he said.
The Intergovernmental Panel on Climate Change, an advisory body to world leaders, concluded last year that global carbon dioxide emissions would need to fall by 50 to 85 per cent by 2050 to prevent average global temperatures from rising more than 2 degrees centigrade.
Among the Group of Eight leading economies, Japan, Germany, the UK, France, Italy and Canada, but not the US or Russia, have endorsed the goal of cutting emissions by half.
The IEA report, commissioned by G8 leaders at the Gleneagles summit in 2005, put the cost at $45,000bn during the next 40 years, or 1.1 per cent of global economic output over the period.
The agency said the world needed to build 32 nuclear plants and 17,500 wind turbines every year, and outfit 35 coal-fired power stations annually with carbon capture and storage equipment; rates of investment that are far ahead of today’s levels.
It also said reducing carbon emissions by half would require commercialising technologies now deemed too experimental or expensive, saying: “Nearly 1bn electric and fuel cell vehicles need to be on the roads by 2050.”
To make those vehicles commercially viable, it said, carbon dioxide emissions would need to be priced at $200 per tonne, providing there was good technological progress. Without that progress, the price would need to be $500 per tonne…
Sixty per cent of the investment would need to be made in developing countries, the agency said. Disagreements over who should pay for such investments have been a major stumbling block to convincing China, India and other fast-growing but poor countries to sign on to emissions-cutting schemes.