- Education And Career
- Companies & Markets
- Gadgets & Technology
- After Hours
- Banking & Finance
- Energy & Infra
- Case Study
- Web Exclusive
- Property Review
- Digital India
- Work Life Balance
- Test category by sumit
Davos 2023: Carbon Should Be Priced Properly, Experts Say
The leaders in the sector think it's important to create an environment where businesses desire to cut emissions and can do so while earning profit
Photo Credit :
Utilising inexpensive fossil fuels has made progress possible, but it has also created an environmental risk that could result in irreparable harm. The countries need to cut carbon emissions somewhere between 25-50 per cent by 2030, firmly stated Kristalina Georgieva, Managing Director, International Monetary Fund (IMF) at World Economic Forum (WEF) 2023.
Bill Winters, Group Chief Executive, Standard Chartered Bank, responded to the damage inflicted by the firms, stating that the decision-making process for every organisation, including banks, would be radically different if they knew they are taxed for what we are doing to the environment.
Bringing up the subject of taxes in the conversation, Georgieva said, “Carbon price can be done in very different ways. Tax is the most efficient way, but it is not politically feasible."
She added by saying, "Moving the conversation away from tax vs. no tax is necessary if we're to take the necessary steps to quickly decarbonise our economies.” The political difficulty of the carbon tax was acknowledged by Winters as well, but he offered a solution and said, "You have a private sector market-based mechanism to get into the correct place and incentivise the appropriate behaviour if there is a carbon price and the money is actually going to those who are lowering carbon emissions."
Further, when questioned about the resources needed to reduce emissions, Georgieva responded that there is plenty of money. They don't proceed as they ought to. They continue to reject the requirement of accepting that carbon must be priced and that its price must rise as a result, she added.
Global north and south polarity
The topic of the global north failing to acknowledge the global south came up during the discussion. Patrick Khulekani Dlamini, Chief Executive Officer and Managing Director of the Development Bank of Southern Africa agreed and stated, "The problem is the access and the cost of capital, and the perception of risk that they see in the global south."
Banks are benefiting from a leveraging factor as the main channel of money flowing from the global north to the global south is only around 1/15th of the own resources provided by the affluent countries by funds, Winters stated.
He even added that the banking industry is pleased to support a public-private collaboration even when a sizable sum of the USD three trillion in ESG funding that has been designated for these projects is not making it to the intended destinations.
Mitigating emissions with technology
The catastrophic invasion of Ukraine compelled Europe to shine by making the need for a green transition, which was a subject of wind of survival for Europeans, claimed Georgieva.
The experts talked about how, in contrast to the rest of the globe, Europe has actually cut back on its emissions.
“We can implement a cap and trade system and they will receive a fair price for carbon and will also benefit from the incentives that the United States has set up. We can use funds from the private sector, and can combine the public and private sectors,” Winters suggested.
The consensus among experts is that technology can reduce these hazards on a daily basis. Technology has an impact on how current practices are changing the business landscape. “In the aviation industry, significant funds are being invested in the use of green hydrogen or green steel,” they affirmed.
Dlamini commented, “The global south and government officials have the necessary technical capabilities; deal-making is widely practised there. We need to start addressing their capacity so that people can interact fervently and have a far deeper understanding of the dynamics in their economies and communities.”
The experts also deliberated about how to speed up the adoption of current technologies, which will require subsidies—which is unfortunate because people despise them they mentioned.
Challenges on the road to zero emissions
Dlamini highlighted that companies need to understand what is green and what is not. He also mentioned that they had a complaint with the World Bank over the lack of access to the risk experience database, which the companies would then pull as the situation changed.
According to Oliver Bate, Chief Executive Officer of Allianz SE, governments have been slow to reduce emissions. He said, “The cost of delay is also quite enormous in developing countries. Speed is critically important in this fight. We have to balance the risk.” He added, “Leakage is a terrible thing, it will never go to zero. We have to balance those risks to the climate of the planet.”
Winters also mentioned the existence of private sector initiatives and the eagerness of private money to get involved. Dlamini said that it is crucial that various development banks collaborate with the government to strive to congregate these funds and technology for the entire world.
“The country should have strong fundamentals so that you attract private investment,” Georgieva said.
Dlamini cited Germany as an example, where intelligent demand reduction has resulted in a significant increase in energy prices. By continuing to cut costs, he said, "Our company has lowered energy consumption more than 20 per cent year over year."
When finally asked about how the prices of carbon should rise, to which experts said that regulations, subsidies for low-carbon goods, and high-carbon goods subsidies low-carbon goods can all be used to provide the correct kind of incentive for consumers.
“Establish a climate where the corporation wants to reduce emissions and it will be profitable,” they concluded.