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August 17, 2022

PwC/World Economic Forum report: An international carbon price floor could spur greater emissions reduction

An international carbon price floor (ICPF) could spur greater emissions reduction for carbon dioxide and other greenhouse gas (GHG) and to help address the global climate crisis, according to a new report by PwC and the World Economic Forum – “Climate Ambition: Analysis of an International Carbon Price Floor”.

”Adopting an international carbon price floor could be the most effective measure to encourage investment in renewable energy and significantly reduce global emissions by more than 12%. According to PwC calculations, the cost of implementation would be less than 1% of GDP, and that cost could be offset by avoiding economic losses associated with global warming”, said Dinu Bumbăcea, Country Managing Partner PwC Romania.

Current prices create an uneven playing field and limit the climate ambition of countries that fear loss of international competitiveness.

In June, the IMF put forward the framework for an ICPF that proposes different price points for emissions for economies at different stages of development. The IMF’s proposal calls for an ICPF that by 2030 would reach USD 75 per tonne for high-income countries, USD 50 per tonne for middle-income countries and USD25 per tonne for low-income countries. This structure is intended to mitigate the possibility that emissions will move to countries where the cost of emissions is low – carbon leakage – while encouraging low-income countries to participate.

Other findings from the report include:


  • An ICPF could raise up to 3% of GDP in revenues in some countries, which could be redistributed to lower-income households and help deliver a just transition.
  • A reduction by over 12% due to the international carbon price, combined with countries’ existing pledges for emission reductions would help limit global warming to 2°C above pre-industrial levels. And together with strengthened climate ambition and action, this would help give the world a better chance of reaching 1.5 degrees.
  • Low-income countries might be provided financial incentives to participate in the ICPF from a global account funded by a small portion of carbon pricing revenues of high-income countries.
  • According to the PwC Net Zero Economy Index, the rate of global decarbonisation reached 2,5%, but this was just a slight increase from the 2019 rate of 2,4%.
  • A decarbonisation rate of 12,9% is now required to achieve the 1,5ºC objective – more than five times greater than what was achieved over the last year



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