Put a price on carbon and watch emissions fall, BP's Bob Dudley says

British Petroleum Chief Executive Bob Dudley on October 1, 2018
Eric Piermont | AFP | Getty Images

BP chief executive Bob Dudley has called for a "united effort to put a price on carbon," claiming it would act faster at cutting CO2 emissions than any warning from politicians.

Speaking at the One Young World conference in London on Wednesday, Dudley told an audience that "unless you put a price on something," you can't control how it's consumed.

"One of the things we talk most about doesn't have a price," he said. "There's got to be a united effort to put a price on carbon, so when you click a switch on the wall for electricity you're going to pay a higher price."

"Get a price on carbon and boy, the market will respond," Dudley added. "That's going to change the (emissions) situation more than 18-month or four-year outlooks from politicians."

The outgoing BP boss noted that while emissions were stagnating in Europe and North America, other parts of the world were falling behind in addressing the climate crisis.

"There are big coal-fired power plants opening in other parts of the world and that's the epicenter of the problem," he said.

According to researchers at the London School of Economics, a carbon price can be implemented in one of two ways. Governments can either add a levy to the distribution, sale or use of fossil fuels based on their carbon content, or use a quota system called cap-and-trade, which sets regional emissions allowances in advance and lets companies bid for "permits to pollute."

Funds raised through carbon pricing can also be reinvested into programs aimed at further reducing pollution.

In an email on Thursday, David Robinson, economist at the Oxford Institute for Energy Studies, told CNBC that pricing carbon could be an effective way to reduce emissions.

"In the power sector, a high enough carbon tax would penalize coal-fired plants and can lead to their closure and replacement by other lower carbon technologies, like gas or renewables," he said.

"If electricity companies think carbon prices will be high in future, they will be more likely to invest in low-carbon (alternatives) and avoid investing in coal. The financial community would also be reluctant to support investment in high-carbon products, including coal-fired plants and conventional vehicles."

"The shift to less carbon intensive energies and products may not lower energy demand, but it will lead to lower CO2 emissions," he added.

One report in March this year, published by the Global Energy Monitor, claimed falling costs of renewable energy are already reducing the number of coal-fired power plants.

And a separate report, from Canada's Ecofiscal Commission (EC) — an economic research organization — explored how carbon pricing measures had been implemented globally.

It claimed that a cap-and-trade model implemented by 10 U.S. states in 2009 resulted in a 20% decline in emissions from electricity between 2012 and 2019.

It also found that a carbon tax introduced in British Columbia, Canada, in 2008 had reduced the use of gasoline and natural gas in the province by 7% per person.

Elsewhere, carbon pricing initiatives in Tokyo, the U.K. and Sweden had also helped to drastically reduce emissions and the use of fossil fuels, the report claimed.

In the long-term, ramifications of emissions pricing would likely see consumers switching to renewable energy providers or even opting to generate their own electricity, Robinson told CNBC.

"(But) if final electricity prices rise too much and too fast, there is always the risk of a consumer back-lash, like we have seen with the gilets jaunes in France," he warned. "For this reason, it is critical to ensure that any new tax has political and social support and that vulnerable consumers are protected."