A global CO2 price of $50 per tonne could reduce emissions by almost 40%, with costs averaging only 0.5% of GDP, according to a study by the Bertelsmann Foundation. Germany introduced a CO2 price of €25 per tonne at the beginning of 2021, rising to €55 per tonne by 2025. The price increase has already led to the decommissioning of 360,000 cars, reducing emissions by 0.8% of all car emissions in Germany. The Bertelsmann Foundation study, entitled “EU climate policy, climate clubs and CO2 border adjustment”, calculated that a global CO2 price of $50 per tonne would reduce emissions by 11.5 billion tonnes, or 38.6%. The study found that a CO2 price would only be effective if it was introduced globally, rather than by individual countries or regions.
The study also found that the cost of a global CO2 price would be only 0.5% of GDP for all countries, and just 0.1% for the EU. The authors suggest a “climate club” in which members agree on a minimum CO2 price, allowing free trade of goods and services within the club. Countries that do not impose the minimum price would have to pay a separate CO2 tariff on exports to club members. The study found that if the EU and the US were members of the club, global emissions would be reduced by 2.6 billion tonnes of CO2. If China also joined, emissions could be reduced by 6.9 billion tonnes, or 23% of global emissions.
The Bertelsmann Foundation study suggests that a global CO2 price is the most effective way to reduce emissions, with moderate economic costs. The study also highlights the importance of international cooperation, rather than individual countries acting alone. The authors suggest that a climate club could be a solution, allowing countries to work together to reduce emissions while maintaining free trade. The study concludes that an EU border adjustment is only a temporary solution, and that the EU should work with the US and other countries to establish a long-term, global climate club.
