Despite carbon prices having doubled during 2021, they still need to almost double to achieve global climate objectives, Credit Suisse said Monday.
With the race for net-zero carbon emissions being intensified by governments, carbon pricing is the best gauge of the stringency and efficacy of such policies, the bank said.
The global market weighted-average carbon price is roughly US$28 per ton, but prices should be roughly US$50 a ton to achieve climate objectives worldwide, the bank said in a note from its environmental, social, and governance (ESG) team.
“Higher energy prices are also the most effective economic measure to speed up the net-zero transition,” said ESG analysts Betty.
A US$50 per ton carbon price would add 25% and 55% to today’s West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas prices, respectively, the bank said.
“Combined with the current underinvestment in both traditional and clean energy supply, ‘greenflation’ risk is likely to the upside over the next three to five years,” it added.