Higher carbon price, border adjustments needed to achieve Paris climate goals: FT Summit

Current low prices for carbon and policy shortcomings are impediments to achieving net-zero carbon emissions by 2050 as required under the Paris Agreement, commodities traders, analysts and energy experts said during the FT Commodities Global Summit Sept. 29.

Average world prices for carbon are today unrealistic and an insufficient incentive to drive people away from fossil fuels, trader Glencore's chairman Tony Hayward said during a panel at the virtual event. Carbon border price adjustments may also be needed, he said.

In addition, "we need to do something quite dramatic with the demand curve to level down the use of energy per capita - we're not going to get there if everyone continues to use energy per capita at the rate that the US or even Europe does," he said. Significant financial support from developed nations to the developing world is also needed as is greater use of carbon capture and storage, he said.

"Robust" carbon pricing and policy coordination need to be introduced to deal with the inequality that exists in carbon use in different regions worldwide, said Nick Stansbury, head of commodity research at Legal & General Investment Management, adding that up to $2 trillion needs to be shifted from one part of the energy system to another to decarbonize the energy system and end the abject energy poverty which still impacts at least half of the world's population. "Climate change risks are not priced properly into markets today," he said, adding that a pricing mechanism could also be used to achieve necessary regional carbon price adjustments.

"Today the world is not on a pathway to a 1.5 degree climate outcome... but we have the technical tools...and we know capital markets can achieve massive flows of capital if required...and the economic context is eminently affordable," Stansbury said.

"There's no way we get to net zero in 30 years unless we really step up (action) dramatically right now and in coming years," said International Energy Agency acting deputy executive director David Turk, who accused companies of "pedestrian greenwashing" and proposed adoption of a sustainable recovery plan from the COVID-19 recession, with governments putting clean energy at the heart of the package. "Governments and private sector players need to step up their game," he said.

Lord Adair Turner, chair of the Energy Transitions Commission, said that oil use would need to fall by 80% to 90% from current levels and thermal coal use by 95% or more by mid-century if the net-zero carbon emissions goal is to be reached by 2050 and this may be "economically impossible." Companies should divest from coal and reinvest in metals such as lithium and cobalt for energy transition, he said.