Carbon Markets 94% Cheaper Than Renewable Support, OECD Says

Carbon markets are about 94 percent cheaper at cutting greenhouse gases than renewable subsidies paid to power producers, according to a study carried out by the Organization for Economic Cooperation and Development, based on data from 15 countries.

The cost of reducing one metric ton of carbon dioxide in the power industry using emissions trading systems is 10 euros ($13.56) on average, compared with 169 euros for feed-in tariffs.

The OECD called on countries to assess the cost-effectiveness of climate-protection rules by taking an inventory of policies that price carbon directly, such as markets, and implicit systems including capital subsidies and feed-in tariffs. The group is making its recommendations as China, the biggest emitter, considers carbon markets and taxes.

“Subsidies wind up in the pockets of the rich,” Anthony Cox, head of the OECD’s climate division, said in an interview in London. “Direct prices, such as emissions trading systems and taxes, are often a more cost-effective way to cut carbon.”

Also, Cox said that Carbon prices are necessary though governments sometimes need to offer additional support to encourage research and development in new technology, such as carbon capture and storage.

Countries used in the OECD research were Australia, Brazil, Chile, China, Denmark, Estonia, France, Germany, Japan, Korea, New Zealand, South Africa, Spain, the U.K. and the U.S.