A dual-track transition to global carbon pricing

Abstract

Unilateral climate policies have been unable to achieve intended emissions reductions. We argue that international harmonization of climate policy beyond the Paris Agreement is the only way forward and that global carbon pricing, either through a tax or market, is the best available instrument to manage this. A foundation has already been laid, as current carbon pricing initiatives cover about 20% of global CO 2 emissions. Since it limits free-riding by countries/jurisdictions, global carbon pricing is, in principle, behaviourally easier to negotiate than other instruments, such as emission targets or technical standards. To overcome political resistance, we propose a dynamic strategy consisting of two parallel tracks and five transition phases. The first track entails assembly of a carbon-pricing coalition that expands over time and exerts moral and economic pressure on non-members to join. The second track involves refocusing UN intergovernmental climate change negotiations on carbon pricing, potentially involving initially heterogeneous prices reflecting distinct income levels of countries, which then gradually converge. The dual tracks are designed to reinforce one another, increasing the likelihood of a successful outcome. The proposal results in a transition trajectory consisting of two interactive tracks and five phases, with specific attention to inequity within and among countries. We illustrate how such an approach could function with either a carbon tax or market. Key policy insights. International harmonization of climate policies is required to achieve the deep cuts in emissions needed to meet the Paris Agreement's 2°C or 1.5°C target.. A focus on carbon pricingeither through taxation or emissions tradinghas multiple strengths: it can be easily compared and harmonized among countries; it can be gradually strengthened over time; it moderates freeriding and fear of competitiveness losses; and it automatically generates revenues to compensate low-income households and countries.

A dual-track transition to global carbon pricing: nice idea, but doomed to fail

“…The challenges of implementing the dual-track proposal van den Bergh et al (2020) propose that a common carbon price that rises over time be negotiated for members of the carbon club under the UNFCCC. They argue that focusing on the carbon price would facilitate climate change negotiations.…”

“…More effective mitigation policies are critical if the temperature goals of the Paris Agreement are to be achieved (Anderson et al, 2020). In 'A dual-track transition to global carbon pricing ', van den Bergh et al (2020) propose an approach to progressively increase the stringency of mitigation policies globally. One or more large emitters adopt(s) carbon pricing and a border carbon adjustment (BCA), which prompts other countries to join the club.…”

A dual-track transition to global carbon pricing: the glass is half full

“…We appreciate the response by Erik Haites (2020) to our paper (van den Bergh et al, 2020a), not only because it is well-informed and contains many subtle remarks, but also because our article was aimed at stimulating debate on how to achieve effective climate policies that limit global warming change to 1.5-2°C. There is no question that the latter represents a tremendous challenge for the global community, and our dual-track proposal is intended to provide a workable approach to it by addressing the free-riding problem through policy harmonization.…”

Climate clubs: politically feasible and desirable?

“…While there have been calls for creating climate clubs for years, more tangible proposals are now being discussed at major think-tanks (e.g. Bruegel (Tagliapietra & Wolff, 2021;Wolff, 2020); Watson Institute (Shaia & Colgan, 2020)) as well as by prominent practitioners (e.g. Podesta & Stern, 2020), including calls for the creation of a US-EU climate club.…”