Pricing the Cost of Carbon Using Net Emissions Technologies

Carbon pricing policies are vital in global climate change mitigation efforts by incentivising reductions in greenhouse gas emissions (GHG) linked to fossil fuel use. Equating the price of carbon to the cost of abatement is paramount for the effectiveness of such policies, as affirmed by Pigou’s theory of negative externalities. The urgent need to limit global warming to 1.5 °C has resulted in growing recognition of the importance of removing carbon emissions from the atmosphere. Net Emission Technologies (NET) have emerged as instrumental technologies in achieving this target, as found by climate-integrated assessment methods. However, there remains a gap in the literature regarding the cost of carbon abatement through NETs. This study addresses this gap by pricing carbon based on the cost of using NETs. A qualitative review of carbon taxes, NETs, and associated costs estimates that carbon prices between USD 90 (ZAR 1710) and USD 600 (ZAR 11400) per tonne of CO2 are needed to incentivise NET investment. The study highlights that current carbon tax rates, particularly in South Africa, are insufficient to encourage NET adoption. It suggests that revised carbon pricing aligned with global climate targets and increased investment in research and development are necessary to enhance NET scalability and cost-effectiveness. Despite challenges such as scalability, sustainability, and resource competition, NETs such as BECCS are vital for decarbonisation, especially in fossil-fuel-dependent regions like South Africa. Collaborative efforts between governments, industries, and research institutions are essential to accelerate the transition to a low-carbon economy and mitigate climate change impacts.