Yellen Urges G-20 Role on Green Policy to Avoid Disputes

U.S. Treasury Secretary Janet Yellen urged the world’s leading economies to coordinate policy on climate change to prevent disputes on policies that are “not well aligned” from spilling into other issues.

The Group of 20 “could provide a platform for economic policy makers to work together,” Yellen said Friday in a speech at the G-20’s meeting of finance ministers and central bank governors in Venice, Italy.

With ministers set to endorse a global agreement on corporate taxation, the focus in Venice is shifting to other issues like climate change and how to tackle it.

French Finance Minister Bruno Le Maire proposed a global floor for carbon pricing. It was a new fold on France’s long-standing ambition to set a global standard on the cost of pollution, something Le Maire acknowledged is not on the cards at the moment.

“We all know the political difficulties to have a set global carbon price everywhere in the world so let’s forget about that for the time being,” Le Maire said. “We propose to have a global floor of carbon price. That could be a good starting point to have all the G-20 member states committing on carbon pricing.”

The remarks underscore the complexity of persuading any group of countries to sign up to measures on carbon pricing, a tool designed to force polluters to pay for their emissions and use market forces to push them toward cleaner technologies. While some 40 nations already have some sort of price mechanism for carbon, applying a single system globally would produce vast differences in the cost of energy.

“Whether this can ever be translated into a global carbon price, or even a global carbon floor price would still be extremely difficult,” said Peter Vis, a former climate official for the European Commission now advising Rud Pedersen Public Affairs. “Should it be 5 euros ($5.93) or 50 euros?”

Yellen’s remarks minutes before Le Maire spoke also appeared to pour cold water on the French approach. She emphasized that any international system for reducing carbon emissions must recognize that countries may use different methods as a substitute for carbon pricing.

It’s one of the key issues up for debate at the United Nations’s annual round of climate talks, due this year in Glasgow, Scotland. Differences over how to write rules governing the global exchange of carbon credits derailed a firm conclusion on the issue at the last talks two years ago in Madrid at the end of 2019.

“Yellen is right in shifting the focus of carbon adjustment mechanisms from pricing to effective climate policies,” said Luca Bergamaschi, co-founder of ECCO, an independent energy and climate research group in Italy. “Building trust and alignment within the G-20 around a shared approach to measuring, tracing and reducing carbon content is certainly more helpful than divisive climate clubs or protectionist measures.”

Yellen acknowledged that different approaches and time frames to decarbonize “could create frictions in terms of global competitiveness,” which the G-20 should seek to address.

The G-20 finance chiefs this weekend are also expected to discuss the state of the global economy as it recovers from the coronavirus pandemic and how it remains vulnerable to the emergence of new virus variants.

©2021 Bloomberg L.P.

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