Question: What are strategies, policies, campaigns, or other actions that could advance carbon pricing at the national or subnational level?
Submit Proposals: https://www.climatecolab.org/contests/2017/carbon-pricing
Deadline: Sunday, Sep 10, 2017 at 18:00:00 PM Eastern Daylight Time
Judging Criteria & Prizes: See below.
Many experts agree that placing a price on carbon pollution is a highly economically-efficient way to tackle climate change. A carbon price creates incentives for the development and adoption of innovative low carbon technologies and practices across the economy. This could involve a carbon tax, a cap-and-trade system, hybrid systems, rebates, or other solutions, and could be revenue-natural, meaning it could reduce other kinds of taxes simultaneously, or the revenue from allowances auctions could be reinvested.
This contest asks entrants for novel policies, new mobilization strategies, measurement technologies or combinations of approaches applied across scale (e.g., city, state, province, sector, regional, national or international levels) to legally enact a price on carbon and/or other greenhouse gases, or to collaborate regionally or internationally on carbon pricing. Entrants may consider strategies to harmonize national and regional carbon pricing and trading mechanisms. The primary end result should be a carbon pricing strategy, and, secondarily, links to verification of reduction in greenhouse gas emissions to the atmosphere.
Carbon Pricing Background and Challenge
The term carbon pricing refers to a price or charge for emissions paid by an emitter per tonne of CO2 to comply with voluntary or compliance policies.[i] Typically, the price of carbon is central to carbon market transactions and trends across taxation (fees and charges) and emissions trading platforms. The intended result is a reduction in emissions to the atmosphere and management of global warming to less than 2 ?C.[ii] Despite the simplicity of the model and the efforts of policy and finance paradigms (e.g., cap and trade, allowances, offset credits, taxes, hybrids) across the planet over the past two decades, there is currently no universal mechanism for pricing carbon or a unified carbon trading system.[iii] Growth in policy and transactional infrastructure to support carbon trading are proliferating even in the absence of a pricing mechanism. For example, about 40 emerging and existing national jurisdictions including 20 cities, states and regions are implementing carbon trading and pricing platforms with carbon prices ranging from US$1/tCO2 e to US$131/tCO2 e (tons CO2 equivalent).[iv] The crucial role of establishing a pricing mechanism and markets for carbon emission reduction is reflected in the 2015 Paris Agreement[v] according to Article 6 that facilitates cooperative carbon pricing approaches and new concepts to achieve cooperation.[vi] However, linking carbon pricing initiatives and carbon markets is fraught with financial and technical issues often resulting in unintended price volatility and loss of carbon pricing control.[vii] Carbon markets, overall, have experienced reductions in carbon pricing and volume over the last five years emphasizing the complex interactions of policy, finance, emission reduction verification and commerce in achieving carbon market growth.[viii] While policy and finance converge on emission reduction programs and carbon pricing mechanisms, the atmospheric burden of greenhouse gases (e.g., annual mean growth rate) continues to increase past 400 ppm in 2015 to 405 ppm in 2016, highlighting the missing link between carbon pricing initiatives and decreasing greenhouse gas atmospheric composition.
- The key challenge for entrants of this contest is to develop carbon pricing strategies and mechanisms that can be applied across local, national, or international scales. A related challenge is to link carbon pricing with verifiable reduction of greenhouse gas emissions.
- Approaches may involve, but are not in any way limited to:
- Novel policies that incorporate carbon pricing initiatives including implementation of taxation of fossil fuels at their source and emissions trading systems,
- New mobilization strategies for the public that may respond to specific carbon pricing initiatives that are easily accessible and transparent,
- Greenhouse gas measurement, accounting and verification technologies that enable carbon pricing mechanisms including verification of any associated reduction in emissions,
- Digital currency and blockchain frameworks in combination with price and trade of offsets, credits, etc.
- Carbon pricing approaches that address the heterogeneity of units (e.g., credits, allowances, sectoral crediting, REDD, renewable credits/certificates) to harmonize all carbon transactions, and,
- Carbon pricing for mega cities, municipalities, states and regions,
- Carbon pricing for industry sectors or specific industries,
- Combinations of any of the above that could lead to the implementation of scalable solutions for subnational and national (including sector-specific) prices on carbon emissions.
- A few examples of out of many possibilities:
- What strategies, policies and measurement technologies for carbon pricing can be applied and scaled across countries and continents that ratify the Paris Agreement?
- What policy and technology elements are required to establish harmonized carbon pricing across specific industries such as transportation, energy production, agriculture and timber production?
- Is all carbon equal in price relative to source (e.g., natural vs. anthropogenic), policies, units and measures?
- How can carbon pricing catalyze public mobilization?
The same questions may be applied to all of the Kyoto gases (methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6)).
Carbon pricing shifts the incentive of greenhouse gas emissions by increasing the cost of carbon pollution. Policymakers have debated the most effective instrument to implement a carbon price. Two of the most prominent suggestions have been carbon taxes and emissions trading. Carbon taxes directly increase the cost of carbon pollution by adding a fee to emissions. Emissions trading schemes set a cap on total allowed carbon emissions and create a pool of pollution permits equal to this cap. Companies must acquire sufficient pollution permits each year to cover their emissions levels. They may also invest in emissions reduction projects to be used as credit on the carbon market. Over time, the cap level is reduced. Examples include the Regional Greenhouse Gas Initiative (RGGI), which is an initiative of nine Northeast and Mid-Atlantic states in the U.S., and the Cap-and-Trade Program of the California Air Resources Board (CARB).
Other policy instruments can also shape the price of producing carbon pollution. For example, direct regulation can change the incentive of greenhouse gases emissions through environmental performance standards. Alternatively, the relative cost of investing in emissions-intensive technologies can be increased through support for investment in renewable energy and other low-emissions technologies. Carbon pricing policies can be legislated as stand-alone policies or can be embedded within broader economic or social policy reform packages. Policies can also differ in the price they impose on carbon pollution, in the economic actors who are exposed to this price, and in the institutions necessary to coordinate the price. These policies could happen at the federal scale, through Congress, regionally or on a state-by-state basis.
Carbon pricing policies can be legislated as stand-alone policies or can be embedded within broader economic or social policy reform packages. Policies can also differ in the price they impose on carbon pollution, in the economic actors who are exposed to this price, and in the institutions necessary to coordinate the price. These policies could happen at the federal scale, through Congress, regionally or on a state-by-state basis. Furthermore, carbon pricing policies can also generate other social and health co-benefits, in addition to benefits to climate in terms of emissions reductions, that can be directly and immediately reaped by communities affected by such policies. These co-benefits provide an additional case for adoption and implementation.
Carbon pricing perspectives have shifted from a Kyoto Protocol framework to a new coalition of countries embodied by the 2015 UNFCCC COP 21 Paris Agreement, now ratified by 146 countries. The Paris Agreement provides a policy framework including the creation of Nationally Determined Contributions (NDCs) that, while voluntary, require a pledge of emission targets and actions taking effect in 2020. Updates are required every five years. Article 6 provides for internationally transferred mitigation outcomes or some form of carbon trading to address carbon markets. However, NDCs will only be as effective as the methods employed to create and verify them. Challenges lie ahead for COP 21 including accounting rules, procedures and methods to verify emission claims. In other words, carbon pricing mechanisms are lacking. In addition, carbon markets for NDCs may require rules and supervision of international transfers of carbon offsets according to price, units and measures to accommodate the heterogeneity of diverse existing programs (e.g., REDD+, units, measures, and time periods).
The ultimate challenge for the Paris Agreement remains its effectiveness in locking in a < 2?C increase in surface temperature in the coming decades. The broad outline of the Paris Agreement goals for emission reduction for the 2020-2025 periods requires moving from a pledge to implementation. How can we ensure that the Paris Agreement evolves into a successful emission reductions with clear pricing strategies? The contest entrants have multiple pathways to address the carbon pricing question in the context of the now planetary scale Paris Agreement and through a variety of cap and trade and tax approaches combined with diverse technologies in communication, currency and measurement.
An example of revenue-neutral carbon taxation has been proposed recently offering a clear rational for this approach.[i] Entrants could address implementation strategies of the tax-neutral program. How would a taxation approach affect the Paris Agreement implementation?
Political Mobilization Strategies
Climate change has become an increasingly politicized issue in some contexts, including within the U.S. political system. Generating support for U.S. carbon pricing schemes, for example, would require political mobilization strategies. Political mobilization around carbon pricing could take a variety of forms. Support might be cultivated amongst political elites (e.g. through direct engagement with elected representatives), through strategic engagement during elections, or through shaping the policy preferences of a particular political party. Alternately, political mobilization strategies might focus on large-scale public mobilization and/or the nurturing of a grassroots social and political movement to generate support for policy enactment at the federal, state, regional or local level.
Prior year’s Climate CoLab’s U.S. carbon price contest surfaced a number of innovative proposals that were outside of the political realm. For example, one of the two Judges’ Choice winners was Sno-Caps, which suggested a voluntary cap-and-trade program conducted using digital currency. This contest welcomes other strategies on how to successfully implement a price on carbon given the current political, social, economic and technological landscape -- many creative possibilities exist.
Judges will be asked to evaluate proposals on the following criteria:
Feasibility of the actions proposed in the proposal. Judges with different kinds of expertise will evaluate the technical, economic, social, and political feasibility of the proposals.
Novelty of the proposal's ideas. Innovative thinking and originality in a proposal will be valued more than encyclopedic knowledge. In addition, instead of selecting a roster of Finalists that are very similar, judges will try to select a group of proposals that represent a diverse range of approaches.
Impact on climate change (for example, for mitigation actions, the amount of greenhouse gas emission reductions or for adaptation actions, the extent to which the actions counteract the effects of climate change) and desirability of other impacts (e.g. economic, social, lifestyle)
Presentation quality. Proposals that are well-presented will be favored over those that aren't. Presentation quality includes how well written a proposal is, how well it uses graphics or other visual elements, and how compelling are its artistic representations of possible future worlds (if any).
Winning proposals will be especially strong in at least one of the first three dimensions, and also well presented.
Judges will evaluate proposals, and deliberate as a group to select the Semi-Finalists, Finalists, Winners, and possibly other awardee(s) at their discretion. Judgments of desirability are also made in the final stage of the contest, by the Climate CoLab community through popular vote, and by the Judges through their selection of the Judges' Choice winner(s).
Top proposals in each contest will be awarded...
Judges’ Choice Award -- Two proposals* will be selected by the Judges to receive the Judges' Choice-- one project, and one practice.
Popular Choice Award – Received the most votes during the public voting period.
The Judges’ Choice Award and Popular Choice Award Winners will be invited to MIT (see prior Climate CoLab Conferences), join the Climate CoLab winners’ alumni, and be eligible for the $10,000 Grand Prize—to be selected from among the winners across contests.
All award Winners and Finalists will receive wide recognition and platform visibility from MIT Climate CoLab. Climate CoLab or its collaborators may offer additional awards or recognition at their discretion.
* Judges’ Choice Award(s) are allocated at the Judging panel’s discretion. In rare cases, the Judges may choose not to select awardees.
Resources for Proposal Authors
- Buonocore, J.J., Guinto, R.R., Levy, J.I., Nystrom, S. & Bernstein, A.S. (n.d.). Health Co-benefits of a Carbon Fee-and-Rebate Bill in MA. Center for Health and the Global Environment. Harvard University. Retrieved from http://chgeharvard.org/resource/health-co-benefits-carbon-fee-and-rebate-bill-ma.
- C2ES. (n.d.). What is Cap and Trade?. Center for Climate and Energy Solutions (C2ES). Retrieved from https://www.c2es.org/policy-solutions/cap-trade.
- Cap-and-Trade Program. (n.d.). California Air Resources Board . Retrieved from https://www.arb.ca.gov/cc/capandtrade/capandtrade.htm.
- Carbon Disclosure Project. (n.d.) Retrieved from https://www.cdp.net/en/campaigns/commit-to-action/price-on-carbon.
- Dimantchev, E. (2017). Can carbon pricing solve climate change?. MIT Joint Program IAP Lecture Series. Retrieved from https://globalchange.mit.edu/sites/default/files/media/presentations/IAP%202017%20-%20Can%20Carbon%20Pricing%20Solve%20Climate%20Change%20-%20Emil%20Dimantchev.pdf.
- Dinan, T. (2013). Effects of a Carbon Tax on the Economy and the Environment. Congressional Budget Office. Retrieved from https://www.cbo.gov/publication/44223.
- European Commission. (2017). The EU Emissions Trading System (EU ETS). Europeam Commission. Retrieved from ec.europa.eu/clima/policies/ets/index_en.htm.
- Frank, C. (2014). Pricing Carbon: A Carbon Tax or Cap-And-Trade?. The Brookings Institution. Retrieved from https://www.brookings.edu/blog/planetpolicy/2014/08/12/pricing-carbon-a-carbon-tax-or-cap-and-trade/.
- GAO. (n.d.). Reducing Greenhouse Gas Emissions. Government Accountability Office. Retrieved from http://www.gao.gov/key_issues/reducing_greenhouse_gas_emissions/issue_summary#t=0.
- Hamrick, K., Goldstein, A. (2016). Raising Ambition State of the Voluntary Carbon Markets 2016. Forest Trends. Retrieved from http://www.forest-trends.org/documents/files/doc_5242.pdf.
- ICAP. (2016). Emissions Trading Worldwide: Status Report 2016. International Carbon Action Partnership. Retrieved from https://icapcarbonaction.com/images/StatusReport2016/ICAP_Status_Report_2016_Online.pdf.
- ICIS. (n.d.). Carbon Pricing Summary. ICIS. Retrieved from https://www.icis.com/energy/carbon-emissions/.
- IEA. (2012). A Policy Strategy for Carbon Capture and Storage. International Energy Agency. Retrieved from www.iea.org/publications/freepublications/publication/policy_strategy_for_ccs.pdf.
- IETA. (n.d.). Reports. IETA. http://www.ieta.org/Reports.
- International Carbon Action Partnership. (n.d.). Retrieved from https://icapcarbonaction.com/en/.
- International Emissions Trading Association. (n.d.). Retrieved from http://www.ieta.org/.
- Kennedy, K., Obeiter, M. & Kaufman, N. (2015). Putting a Price on Carbon – A Handbook for U.S. Policy Makers. World Resources Institute. Retrieved from http://www.wri.org/publication/putting-price-carbon.
- Krifka, K. A 2016 Carbon Market Forecast. The Climate Trust. Retrieved from https://climatetrust.org/a-2016-carbon-market-forecast/.
- Krosnick, J.A. & MacInnis, Bo. (2013). Does the American Public Support Legislation to Reduce Greenhouse Gas Emissions? Daedalus. Retrieved from www.mitpressjournals.org/doi/pdf/10.1162/daed_a_00183.
- NOAA. (n.d.). Annual Mean Growth Rate for Mauna Loa, Hawaii. NOAA Earth System Research Laboratory. https://esrl.noaa.gov/gmd/ccgg/trends/gr.html.
- PAL Carbon Dashboard. (2017). Carbon Dashboard UK Electricity. PAL Carbon Dashboard. Retrieved from http://palcarbon.predictability.ltd.uk/dashboard/.
- Regional Greenhouse Gas Initiative. (2017). Retrieved from https://www.rggi.org/.
- Sandbag. (2016). EU ETS Dashboard. Sanbag Climate Campaign CIC. http://sandbag-climate.github.io/EU_ETS_Dashboard.html
- Schultz, G.P. & Becker, G.S. (2013). Why We Support a Revenue-Neutral Carbon Tax. Wall Street Journal. Retrieved from https://www.wsj.com/articles/SB10001424127887323611604578396401965799658.
- Skeptical Science. (n.d.). The Economical Impacts of Carbon Pricing. Skeptical Science. Retrieved from https://skepticalscience.com/print.php?r=299.
- Stutt, J. (2017). RGGI Emissions Fell Again in 2016. Acadia Center. Retrieved from http://acadiacenter.org/rggi-emissions-fell-again-in-2016/.
- Thomson Reuters. (2016). Climate Observer, America to the Rescue. Thomson Reuters. Retrieved from https://climateobserver.org/wp-content/uploads/2016/01/Carbon-Market-Review-2016.pdf.
- Where Carbon is Taxed. Carbon Tax Center. (n.d.). Retrieved from https://www.carbontax.org/where-carbon-is-taxed/.
- Whitmore, A. (2017). Can emissions trading produce adequate carbon prices?. On Climate Change Policy. Retrieved from https://onclimatechangepolicydotorg.wordpress.com/2017/01/23/can-emissions-trading-produce-adequate-carbon-prices/.
- World Bank. (n.d.). Pricing Carbon. The World Bank Group. Retrieved from http://www.worldbank.org/en/programs/pricing-carbon.
- World Bank. (2016). State and Trends of Carbon Pricing. The World Bank Group. Retrieved from http://www.ecofys.com/files/files/world-bank-ecofys-vivid-2016-state-trends-carbon-pricing.pdf.
- World Coal Association. (n.d.). Coal Market & Pricing. World Coal Association. Retrieved from https://www.worldcoal.org/coal/coal-market-pricing.
- Yager, L. (2009). Climate Change Trade Measures. Government Accountability Office. Retrieved from www.gao.gov/new.items/d09724r.pdf.
- Ye, J. (2014). Carbon Pricing Proposals of the 113th Congress. Center for Climate and Energy Solutions (C2ES). Retrieved from www.c2es.org/publications/carbon-pricing-proposals-113th-congress?gclid=cjn054p3y7wcfczm7aodmkea-q.
[i] Baker, J.A., Paulson, H.M., Feldstein, M., Shultz, G.P., Halstead, T., Stephenson, T., Mankiw, N.G. & Walton, R. (2017). The Conservative Case For Carbon Dividens. Climate Leadership Council. Retrieved from https://www.clcouncil.org/wp-content/uploads/2017/02/TheConservativeCaseforCarbonDividends.pdf.
[iii] Carbon Pricing Leadership Coalition. (2017). 2016-2017 Carbon Pricing Leadership Report. Carbon Pricing Leadership Coalition. http://pubdocs.worldbank.org/en/183521492529539277/WBG-CPLC-2017-Leadership-Report-DIGITAL-Single-Pages.pdf
[iv] World Bank. (2016). State and Trends of Carbon Pricing. World Bank Gorup. Retrieved from https://openknowledge.worldbank.org/bitstream/handle/10986/25160/9781464810015.pdf?sequence=7&isAllowed=y.
[vi] Marcu, A. (2016). Carbon Market Provisions in the Paris Agreement (Article 6). CEPS. https://www.ceps.eu/system/files/SR%20No%20128%20ACM%20Post%20COP21%20Analysis%20of%20Article%206.pdf.
[vii] Carbon Market Monitor. (2016). America to the Rescue: Review of Global Markets in 2015 and Outlook for 2016-2018. Thomson Reuters. Retrieved from https://climateobserver.org/wp-content/uploads/2016/01/Carbon-Market-Review-2016.pdf.