Aug 9, 2017
Hi Adele, I really like the idea of governments using internal carbon pricing for their own management and investment decision.
In spite of your consideration of implementation costs of a proxy carbon price vis-a-vis the social cost of this approach, I am curious to hear how you would suggest a government implements it in a cost effective way. As an example, in the latest Latin America CDP Supply Chain Report (sorry but that´s the data I have promptly), only 25% of participant companies did, in fact, monitor their GHG emissions.
Even if the numbers are higher for the US I believe that basic information about GHG emissions is still laking. Such an approach for public procurements wouldn´t discriminate against companies that are still unaware of the urgency of fighting climate change? I guess your proposal could, potentially, have a greater impact, making both public and private sectors more climate efficient.
Aug 11, 2017
Adele, could you elaborate on this statement in your proposal? "One benefit of this approach is that it caps state spending on emissions-reducing activities at the carbon proxy price......"
Sep 5, 2017
Response to comments:
Thanks for the comments! I definitely think a related step would be for governments to ask firms that bid for government business to quantify and report all their GHG emissions according to an established GHG inventory protocol. My understanding is that there is a range of certifications firms must make to do business with the US federal government, having to do with financial standards, anti-terrorism provisions, and the like. Similarly, federal and state governments could request that firms report GHG emissions. This could be voluntary and give bidders an edge, or it could be mandatory.
My proposal focuses only on emissions related to the acquistion by the government, but both ideas have merit.
To clarify: "One benefit of this approach is that it caps state spending on emissions-reducing activities at the carbon proxy price..." Suppose two firms are bidding for the same government contract to buy a refrigeration system. One emits less GHGs than the other, but is more expensive. How should the government choose between the two bids? My proposal would monetize the emissions of both and adjust upwards the estimated cost of the higher-emitting bid relative to the lower-emitting bid. Whether that makes a difference depends on whether the emissions savings are "worth it," as defined by the proxy price. Unlike standards such as "we will always choose technology A over technology B," this approach only chooses the more emissions-efficient approach when the additional cost is no more than the estimated value of the reduced environmental impacts.
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