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The Carbon Pricing and the Establishment of a Low Carbon Bretton Woods

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From the Paris Agreement to a Low-Carbon Bretton Woods

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Abstract

Financing carbon emission mitigation in line with the general objectives of the Paris Agreement probably represents the largest challenge to its implementation. Scholars and policy makers have identified carbon pricing as a possible solution to this challenge. However, several issues, such as carbon price instability and its excessively low prices, still need to be solved. When discussing the Mitigation Alliance (MA)’s approach to carbon pricing, in this chapter emphasises how it differs from the traditional approaches by shifting carbon pricing from a cost perspective based upon carbon emissions to a value perspective based upon carbon mitigation. Thanks to this approach, termed Positive Carbon Pricing (PCP), in this chapter demonstrates how the MA can effectively trigger a redirection of funding towards efforts necessary to meet the MA Net Zero Carbon (NZC) target. This process also represents the first benefit provided by the MA exclusively to its members. Specifically, the Chapter emphasises the role of Certified Mitigation Outcomes (CMO) in conferring effective value on documented mitigation. It is this value base which establishes CMO as the reference currency for carbon. Following on from the links between carbon as a commodity and CMO it is possible to theorise a MA monetary system that, due to its features, may be defined as Low Carbon Bretton Woods.

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Notes

  1. 1.

    Carbon Dioxide (CO2) is the most common Greenhouse Gas (GHG) and is often used as a reference unit to express levels of GHG emissions (expressed in CO2 equivalent, or CO2eq). In the context of this Chapter and, more in general, of this book the term carbon, expressing CO2, and the term GHG are synonyms, hence carbon is used as single term to express GHG.

  2. 2.

    See Chaps. 3 and 4 of this book.

  3. 3.

    Quota is used in this Chapter and more in general in this book as synonym of ‘assigned share of mitigation burden’.

  4. 4.

    See Sect. 8.2 of Chap. 8 of this book.

  5. 5.

    See Chap. 5 of this book.

  6. 6.

    Interpreting carbon as an exhaustible resource (according to GATT/WTO) requires the establishment of a carbon budget. The carbon budget refers to the maximum amount of carbon that may be released to ensure that, with some probability, global average temperature will not exceed a specified limit. For example, if want to maintain a > 66% probability of limiting global average temperature rise to 2 °C above pre-industrial levels, the planet can emit an additional 1000Gt of carbon until 2100 (IPCC 2014; Zaman et al. 2016). This 1000Gt of expendable carbon is thus an exhaustible natural resource, i.e. a private good.

  7. 7.

    See Sect. 8.2 of Chap. 8 of this book.

  8. 8.

    Costs not directly paid by the carbon emitters.

  9. 9.

    Yet Aldy and Stavins (2012) include emissions reduction credits in the list of the possible pricing paths.

  10. 10.

    For an overview of the rationale, structure, and functioning of ETS see Sect. 7.2 of Chap. 7 of this book.

  11. 11.

    See note 6.

  12. 12.

    For an overview of the rationale, structure, and functioning of the various forms of carbon taxation see Sect. 7.3 of Chap. 7 of this book.

  13. 13.

    Further details on (I)NDCs can be found at: http://unfccc.int/focus/indc_portal/items/8766.php.

  14. 14.

    Far below the price level required to effectively pursue at least the 2°C objective of the PA, estimated to be between US$ 80/tCO2eq and US$120/tCO2eq by 2030 (IPCC 2014; IEA 2015).

  15. 15.

    See Sect. 7.3 of Chap. 7 of this book.

  16. 16.

    The burden sharing defined by the application of the formula introduced in Sect. 5.3 of Chap. 5 of this book.

  17. 17.

    While establishing a fixed price to be paid for each predetermined unit of carbon emission, carbon taxation cannot guarantee a link between the tax revenue and mitigation outcomes.

  18. 18.

    At that time, Alfredo Sirkis was a Brazilian congressman who became President of the Brazilian Parliamentary Commission on Climate Change (CMMC) two years later.

  19. 19.

    The same submission played a significant role during the whole process of developing PA Article 6 (Marcu 2016).

  20. 20.

    PA Section IV, Paragraph 108 (UNFCCC 2015).

  21. 21.

    See also Chap. 6 of this book.

  22. 22.

    Bretton Woods established a fixed exchange rate between U$D and gold (U$D35 per ounce of gold). The flexible exchange rate between the US dollar and any other currency linked to the system allowed for the linked jurisdictions to constantly check the status of their economic wealth by indirectly comparing it to gold.

  23. 23.

    Despite being founded only in 1995, the WTO was originally envisaged during the Bretton Woods discussions, hence interpreted by Levi as part of the Bretton Woods structure.

  24. 24.

    See note 22.

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  1. C+3C Sistemi e Strategie srl, Venezia, Italy

    Michele Stua

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Stua, M. (2017). The Carbon Pricing and the Establishment of a Low Carbon Bretton Woods. In: From the Paris Agreement to a Low-Carbon Bretton Woods . Springer, Cham. https://doi.org/10.1007/978-3-319-54699-5_9

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