This policy brief was first published by T20.
Carbon pricing is an essential tool in addressing the threat of climate change and leveraging investment directed for sustainable energy. But it also poses challenges from an international trade perspective, particularly when paired with carbon border adjustment mechanisms (CBAMs). Several G20 members are already developing policy tools of this kind without coordination.
The G20 has acknowledged the urgency to act to ensure the Paris Agreement targets are achieved through energy transition, and has expressed its willingness to enhance cooperation in the field of carbon pricing. This policy brief examines how decarbonisation can be achieved through plurilateral and multilateral cooperation in the field of carbon pricing.
The G20 and other relevant multilateral institutions could promote a set of common and inclusive principles for carbon pricing. This could help simplify the design of new schemes and reduce frictions if CBAMs are established. Rulemaking in this area could be combined with capacity-building initiatives and support for developing countries, according to the relevant principles of the United Nations Framework Convention on Climate Change.