Felipe Calderón: Universal carbon pricing and green bonds needed to entice investors

Former President of Mexico and chair of the Global Commission on the Economy and Climate Felipe Calderón has called for a universal carbon pricing mechanism to promote private investment in low-carbon technologies and "get the job done" following the Paris Agreement.

Opening the second day of the Business and Climate Summit in London yesterday (29 June), Calderón called on businesses to help drive the transition by utilising willing investors in order to overcome financial barriers and deliver on goals established by governments.


While investors remain concerned about ongoing climate risks, Calderón believes the world is now ready for the implementation of a universal carbon price.

“Now is the time to make real things happen on the ground,” he said. “Now is the time to get the job done and move from ambition to action. Hundreds of companies are using internal carbon pricing but we need to make it universal. We need to reformulate property taxes and remove subsidies for fossil fuels.

“We have to invest in deployment for existing clean technologies and innovation to bring down the cost. It’s incredible that today research and development tin terms of GDP is half the amount it was 20 years ago. In the 80s governments were investing twice as much in research and development.

“We have to improve government ability to attract investment and provide a roadmap to shift the trillions we need into the low carbon economy.”

Calderón insisted that the shift to a low-carbon economy would depend largely on infrastructure, claiming that investing just 1% of GDP on new infrastructure in leading economic countries would boost GDP by 1.5% by 2020. According to Calderón, this growth could be more substantial in developing countries.

“Infrastructure will either be the pillar on which we base our development and prosperity, or it will lock us into a high carbon path and therefore will become the gravestone that marks the failure of our civilization. Investing in sustainable infrastructure is not just one potential pathway. It is the only growth story of the future,” Calderón added.

Mainstream investment

Also speaking at yesterday’s Summit was HSBC Bank chief executive Antonio Simoes, who agreed that immediate Government action must be taken to encourage more green investment and ensure that the low-carbon transition moves from “niche” to “mainstream”.

“This is a race against time to deliver what we promised in Paris,” Simoes said. “Major investors are becoming increasingly active and demanding change in this space. Investors are the ones now demanding sustainability. Large energy companies and high carbon businesses in general are responding by allocating finance to greener and more sustainable operations.”

With the World Bank – which has already pledged more than $1bn to future-proof developing cities – estimating that 70% of investment into sustainable infrastructure will need to take place in emerging countries, Simoes called on economic powerhouses such as China to “pull their weight” and bridge the emissions gap.

Simoes urged companies to turn to a flourishing green bond market – currently worth $35bn (HSBC’s is worth $1bn) – as a means to drive investment and “unleash private sector finance” to the world’s urban areas.

“We have to increase the access to private sector funding for emerging markets,” Simoes added. “We need to bring the global green bond market up to scale. The scale needs to move from niche to mainstream, and for that to happen we need standardisation and better incentives help investors quantify the risk and measure an accurate cost of climate. Finally we need to unleash the private sector finance to the world’s urban areas.”

Echoing these calls for greater investment in the green economy, HSBC’s group chief executive Stuart Glover added: “Six months on from Paris, we are much closer to being able to implement the terms of COP21 than we were at the start. The barriers to investment are lower, the call to action is louder and there is a clear willingness on the part of business and investors to change their ways and adapt their business models.

“Investors want to invest in sustainable projects and reduce the carbon footprint of their portfolios. With better standardisation, enhanced disclosure rules and better incentives for issuing green bonds, the COP21 goals can be met, but we must continue to work in unison and at pace with the public sector.”

George Ogleby

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