G7 Supports Carbon Fee and Dividend and CBAM

Over last weekend, G7 climate, energy, and environment ministers released a negotiated statement, which emphasized member countries’ commitment to advancing climate and trade policies. Highlights from the communiqué include:

• The “crucial role” of carbon pricing and other market-based mechanisms;
• The need for policies to address the carbon leakage that occurs when energy intensive production shifts to countries with lower environmental standards;
• The importance of emissions intensity as a metric in designing those policies; and
• The role of secure supply chains for critical minerals in the clean energy transition.

The ministers ultimately adopted several recommendations from the Consortium for Climate-Aligned Trade (CCAT), of which the Council is a member, making the addition of these commitments especially significant.

The G7 statement also comes right as the EU parliament voted to approve its CBAM. These actions signal that leaders worldwide are growing increasingly supportive of trade policies that reduce global emissions and encourage international climate cooperation.

See especially paragraph 52 of the communique:

52. Carbon markets and Carbon pricing: We reaffirm the crucial role of carbon markets and carbon pricing as key measures in promoting a transformation to net zero, driving costefficient emission reductions, enhancing the alignment of financial flows with the longG7 term goals of the Paris Agreement, and facilitating sustainable economic growth. We highlight the importance of designing and implementing such measures in a way that leaves no one behind in the transformation to net zero. The IPCC report states that equity and distributional impacts of carbon pricing instruments can be addressed by using revenue from carbon taxes or emissions trading to support low-income households, among other approaches. We will work together, and with partners beyond the G7, to expand the ambitious use of carbon markets and carbon pricing.