Putting a price on carbon to help reduce the investment gap and encourage low-carbon transition
Carbon pricing is recognized around the world as an effective policy tool to facilitate sustainable energy transition. The external cost of carbon emissions such as health damage, climate impact and social costs paid by society should be shifted to the producers and consumers responsible for producing pollution. There are two main mechanisms for carbon pricing – emission trading schemes (cap and trade) and carbon taxation.
In this analysis, a carbon price of US$ 40/tCO2-e has been considered as a mechanism for limiting emissions and levelling the playing field for low-carbon technologies, currently limited to the power sector. Carbon pricing mechanisms can be similarly applied to other sectors such as the industry sector. The fuel consumption of Georgia’s industry sector is still currently dominated by fossil fuels, such as natural gas and solid fuels (i.e., coal). The resultant emissions are at around 2,086 ktCO2-e in 2030, across the SDG and the ambitious scenarios. Consideration of a carbon price is likely to lead to process innovation or uptake of cleaner technologies.
*this recommendation is applicable for all ambitious scenarios, with the exception of clean electricity export scenario