Stéphane Dion. A Canadian Member of Parliament since 1996, and Minister of the Environment from 2006 – 2008. Chaired the U.N. Climate Change summit (COP 11/MOP 1) in Montreal in 2005.
Éloi Laurent is a senior economist and scientific advisor at OFCE (Sciences-Po Center for economic research, Paris) and visiting professor (Stanford University). He was an aide to the French prime minister (2000-2002).
Summary of Carbon Pricing Views
The climate-negotiation problem is a problem of free riding. To overcome this, the best international co-ordination instrument we can establish is a single global carbon price. Countries can satisfy their price commitment with a tax or cap and trade.
To satisfy their “Common But Differentiated Responsibility,” developed countries would be required to set aside part of their revenue as a Green Climate Fund to help developing countries introduce policies to attenuate emissions and adapt to climate change.
[ Negotiations, Treaty Mechanics, Comparisons, References ]
References and Full-Text Links
2015-05 Dion, Stéphane. “A World Price for Carbon.” (en français) May 5, 2015, Harvard International Review.
2014-12 Dion, Stéphane & Éloi Laurent. “Making Climate Promises Count.” (en français) Project Syndicate.
2014-10 Dion, Stéphane. “Are the Negotiations for a Global Climate Change Agreement Stalled? If so, What Can Be Done?.” (en français) Harvard Canada Seminar.
2013-11 Dion, Stéphane. “North America Should Lead the Way Toward a Worldwide Harmonized Carbon Price-11.” (5 pp.) The NAFTA Promise and the North American Reality
2013-09 Dion, Stéphane. “Carbon Taxes: Can a Good Policy Become Good Politics?“ (18 pp) Chapter 10 from Tax Is Not a Four-Letter Word: A Different Take on Taxes in Canada.
2012-06 Dion, Stéphane. “Global Carbon Pricing as a Tool to Enhance National Climate Laws.” (4 pp.) Introductory Remarks to GLOBE International’s World Summit of Legislators, Rio de Janeiro, Brazil, June 17, 2012.
2012-06 Dion, Stéphane. “Towards a Science-Based Global Harmonized Carbon Price.” (4 pp.) Introductory Remarks delivered on a Panel Discussion at
the UNCSD Rio + 20, June 15, 2012.
2012-05 Dion, Stéphane & Éloi Laurent. “From From Rio to Rio: A Global Carbon Price Signal to Escape the Great climate Inconsistency-05” (20 pp.) Working papers OFCE.
Summary for comparing experts
Fundamentals of Global Carbon Pricing:
1. The International Climate Problem Is a Free-Rider Problem
As long as individual countries hope that other countries will do the job for them, as long as they can take advantage of other countries’ efforts while doing as little as possible themselves, as long as they can wave the ready excuse “I’ll do it when my neighbour does it” — in short, as long as they can be climate free-riders — our efforts will fall far short of the mark. The way to put an end to carbon leakage and climate free-riding is to establish a global carbon price signal.
2. A Global Carbon Price Is Needed
We propose refocusing these international efforts on negotiating a global carbon price signal, harmonized in principle but flexible in practice, instead of doggedly spending the next few years attempting to convince countries to accept stricter national targets for quantitative reduction of their greenhouse gas (GHG) emissions. … Simply put, we must move away, collectively, from an ineffective logic of constraint to a pragmatic logic of price incentives. ||| The best international co-ordination instrument we can establish to combat climate change is a global carbon price signal.
3. Cap-and-Trade Can Comply
We propose: countries would each make a commitment to introduce, in their respective jurisdictions, a carbon price aligned with a scientifically-validated international standard. … In pricing carbon emissions through a tax or a cap and trade, of course we must gradually eliminate fossil fuel energy subsidies.
4. Green Fund Transfers Are Essential
Developed countries would finally be required to set aside part of their revenues to help developing countries introduce policies to mitigate emissions, adapt facilities and create carbon sinks (by means of reforestation, for example). The contributions of individual developed countries would be based on what their respective GHG emissions represent relative to the total emissions of all developed countries. |||
Thus we must ensure that there are international compensation mechanisms. In the name of the “Common But Differentiated Responsibility” principle, developed countries would be required to set aside part of their revenue to help developing countries introduce policies to attenuate emissions, adapt to climate change impacts and create carbon sinks. This requirement would solve the problem of funding the annual injection of $100 billion into the Green Climate Fund that developed countries agreed to provide starting in 2020.
Why a Global Price Is Easier to Negotiate
1. A Price Simplifies Negotiations
This deadlock on reduction targets impacts all aspects of negotiations. ||| The United States, Canada, Japan and a few other developed countries are refusing to strengthen their climate policies as long as other large emitters refuse to follow suit. And given their strong economic growth, China, India and other emerging countries are loathe to adopt absolute reduction targets. The only way to unfreeze these negotiations before it is too late is to re-orient them toward the establishment of a carbon price signal.
2. A Global Price Provides a Countervailing Force against Free Riding
3. The Benefit of a Focal Point
4. Why Caps Appear Unfair to Poor Countries
If there were a single reason to improve the current mitigation logic, it would be this evident fact: developing countries, which now account for 60% of emissions worldwide, cannot accept what they perceive as an obstacle to their economic development, when developed countries have been able to get rich on unlimited use of fossil fuel energy. … On the other hand, these countries might be more open to the idea of a flexible levy of a price per tonne of carbon dioxide, a price from which they would derive revenues, and which their economic competitors would also be required to levy.
For emerging economies, with annual growth rates of between 6% and 10%, an absolute emission reduction target may look more like an obstacle to economic expansion, while a harmonized carbon price signal that is adopted by these countries’ competitors and the revenues of which is for them to use as they see fit.
5. International vs. National Cap-and-Trade
Treaty Mechanics
1. Monitoring
2. Compliance/Enforcement
The international agreement would allow countries to levy border taxes on products from countries that do not establish a carbon price signal in accordance with the international standard. … World Trade Organization (WTO) Director General Pascal Lamy note that “there is considerable scope and flexibility under WTO rules for addressing climate change at the national level.” … The WTO and UNEP point out that countries already make border tax adjustments on all sorts of products.
3. Uniformity of the Global Price
4. Hitting a Target with a Price
5. The Cost of Pricing is Low
6. The Use of Carbon Revenues
Governments would be free to invest, as they see fit, revenues from the carbon emission levy and from the corresponding elimination of fossil energy subsidies. ||| [The following concerns Green Funds, but must also apply to carbon revenues.] Furthermore, governments can decide, for example, to lower individual and corporate income tax substantially, thus stimulating their economies by alleviating the tax burden on productive activities. … Thus governments might do well to use part of their newfound tax revenue to offset all – if not more – of the increased costs of fossil fuel energy for low-income individuals and families.
7. How to count exiting carbon taxes
8. Who Should Initiate the Treaty?
The biggest carbon emitters (the “GHG 20”) should adopt a carbon price signal, harmonized in principle but flexible in practice.
Comparisons that Assume Successful Negotiations
1. Price Volatility
2. International Wealth Transfers
3. Corruption