The Price of Carbon : Ways forward after COP-21
by Christian de Perthuis, Pierre-André Jouvet, Raphael Trotignon
The method used in preparation for the Paris climate conference (COP-21) involves collecting voluntary contributions from each country with regard to action on climate change and negotiating a common framework, including an independent measurement and verification procedure and a provision for the periodic review of commitments. This method postpones discussions on economic instruments and pricing carbon until after COP-21. This Policy Brief outlines three options for the large-scale introduction of such instruments in the years ahead.
- Ending the fragmentation of CO2 allowances markets in the world, by setting the goal of building a transcontinental carbon market by 2020 on the basis of the pilot schemes developed in Europe, China, Korea, and some US states and Canadian provinces.
- Introducing an international “carbon price & rebate” mechanism (“bonus-malus”) to benefit countries with low per capita emissions, that:
– provides an economic incentive for developing countries to join the common system of measurement and verification
under the auspices of the United Nations;
– provides a recurrent contribution from public funds, giving credibility to the promises of financial transfers to the least developed countries;
– rewards, when fully operational, all countries managing to reduce their emissions faster than average (and vice versa).
- Agreeing on carbon price reference values for comparing countries’ voluntary contributions, guiding development aid to low-carbon projects and providing benchmarks for governments to accelerate the international pricing of carbon.
To reduce the risk of average warming to more than 2°C, it is essential to rapidly reorient development models by incorporating the cost of climate risks into the functioning of the global economy. In other words, to introduce a
carbon price that represents the value our societies place on safeguarding the climate. The Paris conference will be a success if it is able open up decisive ways forward in this direction.