Carbon price a necessity, says OECD

The OECD, led by secretary‑general Angel Gurria, urged world leaders to put a price on carbon, saying there is a strong consensus that carbon pricing — either via a carbon tax or an emissions trading scheme (ETS) — should be a cornerstone of global efforts to tackle climate change.

The OECD said fossil‑fuel emissions need to become more expensive if they are to be phased out over the second half of the century, warning that climate change poses a very real risk that doesn’t come with a 'bailout option' like financial crises do.

The article highlights two primary approaches to carbon pricing: a direct carbon tax and an emissions trading scheme (ETS). The OECD recommended either mechanism as a key tool for reducing emissions.

The OECD’s strong endorsement could be inconvenient for the Abbott government, which was moving to abolish Labor’s carbon pricing laws. The Climate Institute noted that this international push and similar calls from the IMF and World Bank create a backdrop against which Australia might stand out if it dismantles a carbon tax and explicit carbon price.

For everyday investors, the OECD’s call signals growing international momentum behind carbon pricing. That trend could lead to higher costs for carbon‑intensive activities over time, so investors may want to stay informed about policy developments and how they could influence sectors exposed to fossil‑fuel emissions.

Yes. The article notes that the OECD’s report came shortly after the heads of the IMF and World Bank called for similar action, suggesting a broader consensus among major economic bodies on the need for carbon pricing.

No. The OECD described carbon pricing as the 'cornerstone' of global efforts, implying it should be a central tool but not necessarily the only solution in a wider climate agenda.

The OECD said fossil‑fuel emissions must become more expensive if they are to be phased out over the second half of the century, indicating a long‑term policy horizon for decarbonisation.