The Future of Carbon Pricing in the Energy Transition | Auke Lont

In this episode, Auke Lont, CEO of Statnett, talks to Joana Freitas, Ambassador for the Lights on Women initiative of the Florence School of Regulation, about the key challenges around carbon pricing. The European Union currently has a mixed system to price emissions – 41% of greenhouse gas emissions fall under the Emissions Trading System (ETS), 7% are covered by carbon taxes and 4% fall under both instruments. Auke Lont considers that the EU ETS system “functions pretty well” and points out two improvements going forward – introducing a floor price and getting rid of free allowances. On top of that, Auke Lont also recognises the importance of specific measures outside the ETS scheme, particularly to accelerate innovation in getting CO2 out of the system. One of the key issues when pricing carbon is whether prices in different countries should be allowed to vary – a single price approach might have significant impacts on specific regions. The other issue is how to address emissions from different sectors of the economy – there are still a number of sectors not subject to emissions restrictions in EU, like Agriculture and Transport. At the same time, the transition to a low-carbon economy needs to be fair and just. “We should indeed try to link the fairness of the transition to the incomes which might be generated through the carbon tax system”, Auke Lont said. One of the most powerful measures presented by the new European Commissioner is the creation of a Carbon Border Tax. Auke Lont notes that it will force other countries to join EU in the climate change fight; however, the use of trade policy instruments might lead to retaliation. Consumers’ behaviour also play a very significant role in the transition – “it might be a catalyst for both industries to move faster in the green direction and for politicians to actually put more regulations or higher prices on carbon”.