Air Pollution Control Equipment Services, Emissions

IEA: We need a carbon price of $50 to incentivize low carbon investment

11 November 2009 – The International Energy Agency’s (IEA) 2009 edition of its flagship World Energy Outlook report has stated that industrialized nations need a carbon price of $50/tonne to make low carbon investment economically attractive.

The IEA said that the price of a permit to emit a tonne of carbon dioxide will need to reach $50 by 2020 and $110 by 2030. In developing countries the price would need to reach $30 a tonne by 2020 and $50 by 2030.

Carbon permits now trade at $21/tonne under the European Union’s Emissions Trading Scheme.

Fatih Birol, chief economist of the IEA, said: “We need a deal in Copenhagen [at the climate talks]. We need a signal for the energy industry. Without that, nothing will move,” he said.

In the USA, a carbon trading scheme is still being negotiated. The Senate, which is unlikely to pass any bill before next year, has set $48 as the maximum that carbon prices would be allowed to rise to by 2020. By 2030 that ceiling increases to about $90.

Mr Birol says the IEA’s recommendation “is much higher than the current EU price and higher than the discussions taking place in the US and elsewhere. But to encourage the investment and make the substantial change that is necessary, we need this price”.