ForTheDoers Blog

Emissions come at a price – so they must also come with a price

Merja Paavola  |  29 July 2019

Is it possible to translate that ecological footprint into the most effective signal there is – price?

Nature and old house

When you bought that new fridge, did you give any thought to how you affected the climate? Or how many grams of carbon dioxide per kilometre was that flight you took on your holiday and does it matter? Human activity leaves a mark, and our ecological footprint has increasingly become the way to visualise how our lifestyles and our consumption affect the environment. But is it possible to translate that ecological footprint into the most effective signal there is – price?

Footprint network statistics show that 60 percent of the world’s ecological footprint consists of CO2 emissions, with the energy sector as the largest contributor. That means that every reduction within the energy sector also has a positive effect in other areas. Prioritising our efforts to change where it matters the most would place the global energy sector as one of the key sectors for transformation. And there are actually several different ways to put a price on the emissions.

Cap & trade, where ideally the emissions cap is decreased in such a way that the climate targets are met, creates a market for the emission allowances. Any given reduction will then take place where it’s most cost-efficient, no matter where or in which sector.

Given the challenge we face, we can’t really afford not to be as cost-efficient as possible.>

In our globalised world the emissions from something produced in one country are often attributed to the country where the end consumer is, but the price tag for the emissions connected to it is not. In a global cap & trade system, those emissions would end up on the product’s price tag, regardless of where it is sold. That would make it possible for us as consumers to assess the ecological footprint of a product merely by its price tag. The larger the footprint, the higher the price. A global cap & trade, or interconnected regional trading schemes, would not only be the most cost-efficient way to reduce emissions, but it would also help you to do more sustainable choices.

There is a trading scheme in place within the EU. During the economic recession consequent, low demand for allowances created a huge oversupply. If any it showed how important the cap & trade properties are for the system to work efficiently. Now, this has been changed. But even though the scheme has been developed, it’s yet to be aligned with the ambition to become climate-neutral by 2050 as that ambition still needs to be converted into hard targets at the EU level. That, I would say, it’s necessary.

Merja Paavola

Merja Paavola

Corporate Vice President, Public Affairs
Tel: +358 50 396 1161
merja [dot] paavola [at] fortum [dot] com

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