Post-Covid Recovery Could Benefit from Carbon Pricing, Research Shows

by | Nov 6, 2020

(Credit: Pixabay)

As countries across the globe consider how they will build back their economies while they deal with the impact of Covid-19, it may be an opportune time to introduce carbon pricing, according to the International Institute for Applied Systems Analysis (IIASA). Research from IIASA indicates that such a move will tackle climate change while generating socioeconomic benefits.

While endorsed by many economists, carbon pricing has been slower to gain traction because of its potential to shock economies and the difficulty of securing political support for increasing taxes. However, according to the authors of a new paper published in the journal Climate Policy, fuel prices are already low and people are buying fewer goods and traveling less, so there could be greater benefits to introducing or strengthening carbon prices.

Carbon pricing —  whether in the form of taxes or emissions trading — is an economic instrument to account for the environmental costs of emitting greenhouse gases from burning fossil fuels. Carbon pricing typically applies to the producer with increased costs ultimately trickling down to any activity using carbon.

With markets already reorienting to adjust to supply-and-demand shocks brought on by the pandemic, introducing carbon pricing now would result in marginally less disruption and could help drive greener economic activity.

In the context of low fuel prices over an extended period, as seen in recent months, the researchers also suggest that a carbon tax could help stabilize prices and ensure that renewable energy sources — the prices of which were becoming cost-competitive even before the COVID-19 crisis — can remain competitive.

The context of the coronavirus crisis “actually provides a unique opportunity for mutually reinforcing forward-thinking solutions to improve sustainability and wellbeing as countries recover,” says lead author Kian Mintz-Woo, an alumnus of the 2018 IIASA Young Scientists Summer Program (YSSP) and former postdoctoral research associate at Princeton University.

“As economies move toward recovery, placing a price on carbon could prompt industries, individuals, and firms to move away from more costly fossil-fuel intensive practices and toward long-term economic and environmental sustainability in an equitable way,” explains coauthor Thomas Schinko, Deputy Director of the IIASA Risk and Resilience Program.

The IIASA is an international scientific institute that conducts research into the critical issues of global environmental, economic, technological, and social change.

Stay Informed

Get E+E Leader Articles delivered via Newsletter right to your inbox!

Share This