Using a harmonized carbon price framework to finance the Green Climate Fund

Silverstein, David N. (2011): Using a harmonized carbon price framework to finance the Green Climate Fund.

Abstract

Funding a response to climate change after Kyoto will require another look at both burden sharing and funding mechanisms. After reviewing the risks of cap-and-trade with carbon offsets and the advantages of a harmonized carbon tax, a method is proposed to utilize a harmonized carbon price to finance the Green Climate Fund. A common carbon price is set across all nations with either a carbon tax or an emissions trading floor price with carbon offsets excluded. The harmonized carbon price is incrementally increased until 2050 to reach the cost of atmospheric removal and achieve equilibrium. Carbon revenues collected internally within nations are used for internal investments in climate change. Financing for the Green Climate Fund is generated from transferring a percentage of the collected revenues, based on a sliding window of historical responsibility for fossil fuel emissions and national wealth. Collected revenue is disbursed for climate aid based on a set of national climate need factors for adaptation and mitigation, including preserving strategic carbon absorbers, low-carbon infrastructures, technology transfer and population management. In the interest of distributive justice, nations themselves determine the need factors of each other. Unlike cap-and-trade, this method does not explicitly set emissions caps, but total global emissions can be regulated nevertheless. Formulas are presented for collection and disbursement, which require parameters for a globally harmonized carbon price, a climate fund contribution rate, historical responsibility from fossil fuel emissions, a national wealth threshold for fund contributions and need factors for each nation. Published economic and emissions data are used with the formulas to demonstrate an example of how the financing can work. This presents an equitable way to address climate needs across all nations on both a global and regional level.

• Item Type: MPRA Paper
• Language: English
• Keywords: climate change; global warming; green climate fund; carbon tax; cap-and-trade; climate finance; Kyoto protocol
• Subjects: F - International Economics > F1 - Trade > F18 - Trade and Environment; F - International Economics > F3 - International Finance > F35 - Foreign Aid; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F51 - International Conflicts ; Negotiations ; Sanctions; E - Macroeconomics and Monetary Economics > E0 - General > E01 - Measurement and Data on National Income and Product Accounts and Wealth ; Environmental Accounts; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F53 - International Agreements and Observance ; International Organizations; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming

References

Ackerman, F., (2008) Carbon Markets and Beyond: The limited Role of Prices And Taxes in Climate and Development Policy, G-24 Discussion Paper No. 53, United Nations http://www.g24.org/ack0908.pdf

Ackerman, F, DeCanio, S., Howarth, R., Sheeran, K. (2009) Limitations of integrated assessment models of climate change., Climate Change 95:297-315 http://www.springerlink.com/content/c85v5581x7n74571/

Ackerman, F., Stanton, E. (2011) Climate Risks and Carbon Prices: Revising the Social Cost of Carbon. Stockholm Environment Institute, US Center http://www.sei-us.org/publications/id/399

Ackerman, F., Stanton, E. (2010) The Social Cost of Carbon., Economics for Equity and the Environment Network, http://www.e3network.org/papers/SocialCostOfCarbon_SEI_20100401.pdf

AGF (2011) Final report, High-level Advisory Group on Climate Change Financing, United Nations http://www.un.org/wcm/content/site/climatechange/pages/financeadvisorygroup/pid/13300

ARB (2011a) Final Supplement to the AB 32 Scoping Plan Functional Equivalent Document, California environmental protection agency, Air Resources Board http://www.arb.ca.gov/cc/scopingplan/document/final_supplement_to_sp_fed.pdf

ARB (2011b) AB 32 cap and trade, final regulation order. California environmental protection agency, Air Resources Board http://www.arb.ca.gov/cc/capandtrade/finalregorder.pdf

Atteridge, A., (2011) Will private finance support climate change adaptation in developing countries? Stockholm Environment Institute working paper No. 2011-05 http://www.sei-international.org/mediamanager/documents/Publications/SEI-WorkingPaper-Atteridge-WillPrivateFinanceSupportClimateChangeAdaptationInDevelopingCountries-2011.pdf

Bloom, A., Palmer, P., Fraser, A., Realy, D., Frankenberg, C., (2010), Large-Scale Controls of Methanogenesis Inferred from Methane and Gravity Spaceborne Data, Science v327, 322-325 http://www.sciencemag.org/cgi/content/short/327/5963/322

Boden, T.A., G. Marland, and R.J. Andres. (2009) Global, Regional, and National Fossil-Fuel CO2 Emissions. Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., U.S.A. doi 10.3334/CDIAC/00001 http://cdiac.ornl.gov/trends/emis/meth_reg.html

Bongaarts, J., Sinding, S., (2011) Population policy in transition in the developing world., Science 333(6042) 574-576 http://www.sciencemag.org/content/333/6042/574

Desvaux, M., (2007) The sustainability of human populations, Significance 4(3) 102-107 http://onlinelibrary.wiley.com/doi/10.1111/j.1740-9713.2007.00241.x/abstract

Den Elzen, M., Höhne, N., (2010) Sharing the reduction effort to limit global warming to 2°C. Climate Policy, v10 no3 pp. 247-260 http://www.ingentaconnect.com/content/earthscan/cpol/2010/00000010/00000003/art00001

Densham, A., Czebiniak, R., Kessler, D., Skar, R., (2009) Carbon Scam: Noel Kempff Climate Action Project and the Push for Sub-national Forest Offsets. Greenpeace International, Amsterdam. http://www.greenpeace.org/international/PageFiles/24748/carbon-scam-noel-kempff-carbo.pdf

EIA, (2010), International Energy Outlook 2010, Energy Information Administration, http://www.eia.doe.gov/oiaf/ieo/index.html

Europol, (2009) Carbon Credit fraud causes more than 5 billion euros damage for European Taxpayer. http://www.europol.europa.eu/index.asp?page=news&news=pr091209.htm

Global Utmaning (2009) Carbon Taxation – a forgotten climate policy tool? http://www.globalutmaning.se/upl/files/35153.pdf

Hansen, J., Nazarenko, Larissa, (2004) Soot climate forcing via snow and ice albedos, PNAS 101(2) 423-428 http://www.pnas.org/content/101/2/423.abstract

Huber, M., R. Knutti, (2011) Anthropogenic and natural warming inferred from changes in Earth’s energy balance. Nature Geoscience, advance online publication http://dx.doi.org/10.1038/ngeo1327

Hufbauer G., Kim, J. (2009) Climate Policy Options and the World Trade Organization. Economics: The Open-Access, Open-Assessment E-Journal, 3 http://dx.doi.org/10.5018/economics-ejournal.ja.2009-29

Höhne, N., Hare, B., Schaeffer, M., Chen, C., Rocha, M., Vieweg-Mersmann, M., Fekete, H., Rogelj, J., Macey, K., Fallasch, F. (2011) Negotiations heading towards high warming, high cost pathway http://climateactiontracker.org/publications/publication/97/Negotiations-heading-towards-high-warming-high-cost-pathway.html

IAEA (2005) Thorium fuel cycle – Potential benefits and challenges. International Atomic Energy Agency, Vienna, Austria. IAEA-TECDOC-1450 http://www-pub.iaea.org/MTCD/publications/PDF/TE_1450_web.pdf

IEA (2011) World Energy Outlook 2011 Executive Summary, International Energy Agency http://www.iea.org/weo/docs/weo2011/executive_summary.pdf

INCCA (2010) Climate Change and India: A 4x4 Assessment; A sectoral and regional analysis for 2030s Indian Network for Climate Change Assessment, Ministry of Environment & Forests, Government of India. http://moef.nic.in/downloads/public-information/fin-rpt-incca.pdf

Johnson, Brad, (2010-09-29) GOP Senate Candidates Oppose Climate Science And Policy, ThinkProgress http://wonkroom.thinkprogress.org/gop-senate-deniers/

Llanos, R., Feather, C., (2011) The reality of REDD+ in Peru: Between theory and practice - Indigenous Amazonian Peoples’ analyses and alternatives. Forest Peoples Programme, AIDESEP http://www.forestpeoples.org/the-reality-of-redd-plus-in-peru-indigenous-amazonian-peoples-analyses-and-alternatives

Morris, D., Worthington, B., (2010) Cap or Trap? How the EU ETS risks locking-in carbon emissions., Sandbag, London. http://sandbag.org.uk/files/sandbag.org.uk/caportrap.pdf

Morris, D., Worthington, B., (2010b) Carbon Fat Cats 2009., Sandbag, London.

NIER (2010) The Swedish Economy September 2010. National Institute of Economic Research, Stockholm http://www.konj.se/download/18.1091e265129c840f0c88000140326/Swedish+Economy+september+2010.pdf

Nordhaus, W., (2009) Economic Issues in Designing a Global Agreement on Global Warming. http://nordhaus.econ.yale.edu/documents/Copenhagen_052909.pdf

Nordhaus, W. (2011) The architecture of climate economics: Designing a global agreement on global warming. Bulletin of the Atomic Scientists, 67(1) 9-18

Parry M., Arnell, N., Berry, P., Dodman, D., Fankhauser, S., Hope, C., Kovats, S., Nicholls, R., Satterhwaite, D., Tiffin, R., Wheeler, T. (2009) Assessing the costs of adaptation to climate change: A review of the UNFCCC and other recent estimates., International Insitute for Environment and Development., http://pubs.iied.org/pdfs/11501IIED.pdf

Peters, G., Marland, G., Le Quere, C., Boden, T., Canadell, J., Raupach, M. (2011) Rapid growth in CO2 emissions after the 2008-2009 global financial crisis. Nature Climate Change, advance online publication, http://dx.doi.org/10.1038/nclimate1332

Pielke, Roger A Jr., (2009) An idealized assessment of the economics of air capture of carbon dioxide in mitigation policy, Environmental Science & Policy, v12, 216-225 http://sciencepolicy.colorado.edu/admin/publication_files/resource-2716-2009.03.pdf

Ringius, L., Torvanger, A., Underdal, A., (2002) Burden sharing and fairness principles in international climate policy., International Environmental Agreements: Politics, Law and Economics 2(1): 1-22 http://www.springerlink.com/content/xn6cb7v5bv2gc4c4/

Rogelj, J., Nabel, J., Chen, C., Hare, W., Markmann, K., Meishausen, M., Schaeffer, M., Macey, K., Höhne, N., (2010) Copenhagen Accord pledges are paltry., Nature 464, 1126-1128 http://www.nature.com/nature/journal/v464/n7292/full/4641126a.html

Schwartz, S., Charlson, R., Kahn, R., Ogren, J., Rodhe, H., (2010) Why Hasn’t Earth Warmed as Much as Expected? Journal of Climate 23(10) 2453-2464 http://journals.ametsoc.org/doi/abs/10.1175/2009JCLI3461.1?journalCode=clim

Schuur, E., Abbott, B., (2011) Climate Change: High risk of permafrost thaw. Nature 480, 32-33 http://www.nature.com/nature/journal/v480/n7375/full/480032a.html

Stanton, E., Ackerman, F., (2010) No State Left Behind: A Better Approach to Climate Policy, Economics for Equity & Environment http://www.e3network.net/papers/No_State_Left_Behind_081710.pdf

Statistics Sweden, (2011) The Swedish Economy - Statistical Perspective no 1 2011 http://www.scb.se/Pages/PublishingCalendarViewInfo____259924.aspx?PublObjId=15628

Sumner, J., Bird, L., Bobos, H., (2011) Carbon taxes: a review of experience and policy design considerations. Climate Policy 11: 922-943 http://www.ingentaconnect.com/content/earthscan/cpol/2011/00000011/00000002/art00006

Tipati, A., Roberts, C., Eagle, R., (2009) Coupling of CO2 and Ice Sheet Stability Over Major Climate Transitions of the Last 20 Million Years, Science v326, 1394-1397 http://www.sciencemag.org/cgi/content/abstract/1178296

UNdata, United Nations, Department of Economic and Social Affairs, United Nations Statistics Division http://data.un.org

UNEP (2011) The Emissions Gap Report: Are the Copenhagen Accord pledges sufficient to limit global warming to 2° C or 1.5° C? United Nations Environment Programme http://www.unep.org/publications/ebooks/emissionsgapreport/

UNFCCC (2007), Investment and financial flows relevant to the development of an effective and appropriate international response to climate change., United Nations http://unfccc.int/cooperation_and_support/financial_mechanism/items/4053.php

United Nations (1998). Kyoto protocol to the United Nations Framework Convention on Climate Change., http://unfccc.int/kyoto_protocol/items/2830.php

UVEK 2008: Funding Scheme for Bali Action Plan, A Swiss Proposal for global solidarity in financing adaptation, "Bali Paper" updated for SB28 Bonn, Federal Office for the Environment, Berne. http://www.bafu.admin.ch/klima/10343/index.html?lang=en

Wara, M. (2007) Is the global carbon market working? Nature 445 595-596 http://www.nature.com/nature/journal/v445/n7128/full/445595a.html

WHO Statistical Information System (WHOSIS), World Health Organization. http://www.who.int/whosis/en/index.html