Carbon May Rise to $400 a Ton Unless Spending Surges, OECD Says

By Mathew Carr

Dec. 16 (Bloomberg) -- Carbon permits will rise more than 18-fold to $400 a metric ton by 2050 unless spending on new technologies that curb emissions is increased, the Organization for Economic Cooperation and Development forecast.

Carbon prices may be held to about $200 a ton if there’s more spending on developing technology such as hydrogen fuel- cell vehicles over the next decade, Romain Duval, a senior OECD economist, said last week in an interview in Poznan, Poland.

“The big difference is you assume major new technologies penetrate the non-electric sector,” Duval said.

About 190 nations are seeking an agreement next year to curb greenhouse gases starting 2013 and replace the 1997 Kyoto Protocol. A focus on transport emissions will be important as nuclear power and carbon capture and storage facilities may cut electricity-related emissions, according to the OECD.

Such an effort may over the next two decades cut costs of limiting emissions to less than 2 percent of global gross domestic product in 2050, compared with almost 4 percent under a reference scenario, the OECD said. About 1 percent of 2015 GDP would have to be spent to cut the costs, compared with about 0.7 percent under the reference scenario, the OECD said in a Nov. 27 report titled “Climate Change Mitigation: What do we do?”.

“Ambitious greenhouse gas abatement is economically rational, but it will not be cheap,” said the report, presented at last week’s climate talks in the Polish city, which were sponsored by the United Nations. “The costs would be lower if a less stringent emissions pathway were chosen.”

The report’s base scenario would stabilize concentrations of greenhouse gases at 550 parts per million of carbon dioxide equivalent, or 450 parts per million of only carbon dioxide.

Dana Hanby, director of international markets at First Climate Group, which manages funds invested in emission credits, is skeptical there will be enough spending to reduce costs. “We already see the lower investment in renewables because of the current recession,” she said in an interview.

December 2009 EU carbon dioxide allowances fell 1 cent today to 15.94 euros ($21.83) a metric ton on London’s European Climate Exchange as of 1:14 p.m.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net