Climate Change

Global Harmonized Carbon Pricing: Looking Beyond Paris

Yale Center for the Study of Globalization, International Conference, May 27 and 28, 2015

Download complete pdf here. Individual components below


Photograph of participants

Introductory remarks by Ernesto Zedillo

Session 1: Why insist on an international carbon price?

Moderator: William Nordhaus. Participants: Martin Weitzman, Robert Schmidt, Massimo Tavoni

This discussion is intended for reviewing in a distilled way the theoretical and experiential arguments leading to the presumption that an effective international regime to mitigate climate change would be one in which the parties agree on a harmonized carbon pricing trajectory rather than the global cap and trade pursued so far. Ultimately, we wish to have those arguments articulated in a way that could be effectively conveyed to policymakers, other informed readers or interlocutors and usable for the “term sheet” mentioned below.

Session 2: The national interest argument for pricing carbon

Moderator: Ernesto Zedillo. Participants: Dale Jorgenson, Zhongxiang Zhang, Thomas Sterner, Gilbert Metcalf, Adele Morris

Beyond the global public good dimension, in this part, the argument for carbon pricing will be made for reasons of strict national interest (for each of the key players) such as economic growth, fiscal consolidation, and tax efficiency.

Session 3: Dealing with the practicalities of international carbon pricing (other than participation and compliance)

Moderator: Ernesto Zedillo. Participants: Ian Parry, Richard Cooper, Kurt Van Dender, Grzegorz Peszko, Joshua Linn

This session will address a host of practical issues that must be thought about when designing an international agreement on climate change mitigation focused on carbon pricing. Some, but not all, of those issues are: analysis of whether a minimum price of carbon should be the target; formulas to deal with other energy taxes/subsidies on fuel, electricity, consumption, fuel supply, etc; accounting for other fiscal subsidies like favorable treatment of household energy products under the VAT; treatment of other taxes net of the domestic environmental benefits (e.g., should credit be given for air pollution and traffic congestion taxes?); coverage of emissions sources (just CO2 from energy — not forestry, non-CO2 greenhouse gases?); interpretation of the common but differentiated responsibility principle; formulas for converting national carbon prices into a common currency; international agency(s) to do the measuring and monitoring; acceptable modalities to meet the agreed carbon price (deciding about the coexistence of national tradable emissions permits with international carbon price); options for implementing carbon taxes (e.g., different points in the fossil fuel supply chain) and dealing with some other practical issues (e.g., are some sources too costly from an administrative perspective to include?); lessons learned from existing carbon pricing schemes to date; lessons from other international tax agreements.

Session 4: The challenge of achieving participation and compliance

Moderator: Samuel Kortum. Participants: Carolyn Fischer, William Nordhaus, Santiago Rubio, Scott Shelton

This session will discuss the alternative instruments for promoting participation (including the modality of a “club”), procedures for monitoring, mechanisms for enforcement, and in particular address the question of whether trade policy should be entertained at all, or under which circumstances, as the instrument for achieving participation and enforcement of such international agreement. Some of the thorny issues that need to be addressed are inconsistencies with existing international trade law, potential damage to the multilateral trading system, and the role of the dispute settlement understanding of the WTO.

Session 5: The political economy of carbon pricing

Moderator: Leonardo Martinez Diaz. Participants: David Victor, Eric Toder, Robert Repetto, Jason Bordoff, James Stock, Matto Mildenberger

This session is intended to discuss the political economy implications of carbon pricing. It will deal with both the domestic (in each of the key players) as well as the international political economy challenges for the adoption of carbon pricing.

Session 6: The elements (term sheet) of an Additional Protocol

Moderator: Scott Shapiro. Participants: Silke Goldberg, Kate Brown de Vejar, Matthew McCullough, Scott Barrett

Even if a new protocol were universally agreed at the 21st session of the Conference of the Parties to the UNFCCC in Paris, in all likelihood it would not yield the necessary emission reductions commitments. If this were the case, one would want to consider the possibility that a group of key emitters could form a coalition to complement the Paris agreement with an “additional protocol” and commit to explicit carbon pricing. The purpose of our own conference would be that the presentations and debates will lead us to identify the issues along with the basis for their conceptualization and thus provide the elements necessary to draft a “term sheet” with a view to an Additional Protocol.