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Climate “Procrastination” Caused by Inaction on Carbon Pricing

A new report by European asset manager Legal & General Investment Management (LGIM) noted that policy inaction, particularly on carbon emission pricing, is delaying a timely transition to net zero. The report found that the window to successfully achieving a 1.5°C outcome is closing at “worrying speed” and that carbon pricing is the biggest policy lever available to drive meaningful change, though the solution remained largely unused. According to LGIM, an effective, transparent and significant price on emissions is required to drive a market-led solution to the climate crisis. Around 23% of emissions are subject to a carbon price, but prices are often set at a level too low to make a difference, the report said. Globally, emissions currently cost on average US$6 per tonne of CO2, and only around 4% of emissions are covered by a carbon price within the range needed by 2030 to meet the Paris targets. “A meaningful carbon price, covering all global emissions by an explicit tax or a cap-and-trade mechanism, is desperately needed to induce the immediate and dramatic capital allocation required to build a low carbon energy system,” said Nick Stansbury, Head of Climate Solutions. “However, an objective perspective on the current policy environment would not suggest that this sort of policy is likely any time soon. Instead of tangible action, continued procrastination seems the path of least resistance.”

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