By Nick Hedley
A group of investors including the California Public
Employees' Retirement System (CalPERS) has called for an overhaul of carbon
pricing policies to ensure the world averts the worst impacts of climate
Ahead of the G7 Leaders’ Summit in Berlin, taking place in
late June, the Net-Zero Asset Owner Alliance has argued in a position paper that
carbon pricing and associated policies need to be bolstered to encourage a faster
shift towards low-carbon technologies.
The 73 members of the UN-convened alliance have $10.6
trillion in assets under management among them. They include CalPERS, U.K.-based
Aviva, Germany’s Allianz, Australia-based Cbus Super, South Africa’s Old
Mutual, and PensionDanmark.
The group notes in its paper that carbon prices are mostly
well below the levels needed to limit global warming to below 2°C, let alone 1.5°C.
As of 2021, less than 5% of global greenhouse gas emissions are covered by a
carbon price that is consistent with limiting warming to 1.5°C.
A study by the Organisation for Economic Co-operation and
Development (OECD) shows that achieving net-zero emissions by 2050 would require
a carbon price of around $147 per ton by 2030.
The Net-Zero Asset Owner Alliance says carbon pricing frameworks
need to be supported by a mix of policy instruments, including international
coalitions, to provide “predictable price signals” for investors, companies and
“Carbon pricing has the potential to accelerate the
low-carbon transition across a wide range of sectors, markets and businesses.
But blunt, poorly designed instruments can have regressive impacts, such as
carbon leakage across borders and a disproportionately negative impact on lower
income earners when revenues are poorly distributed,” the alliance said.
Best practice in carbon pricing design includes
international cooperation in the form of “climate clubs,” effective carbon border
adjustment mechanisms (CBAMs), pricing systems that have appropriate coverage
and ambition, and complementary policies such as higher investment in abatement
technology innovation, and the removal of fossil fuel subsidies that counteract
Meanwhile, market stability measures, such as the binding
price corridor proposed by the Alliance last year, would minimize price
Günther Thallinger, a board member at Allianz and Chair of
the group, said: “The sharp rise in energy prices is putting enormous stress on
households and the business sector. Continued government support and relief is
needed to bridge these difficult times.
“Yet, in addition to better managing the near term, we also
need to better position ourselves to avoid this happening again in the future.”
Accelerating the shift to net zero is essential in this
regard, Thallinger said, and requires policy incentives. “These take time to
implement and should not be delayed.”