Photovoltaic solar panels are installed on the roof of Walden III Middle and High School in Racine, Wis., Dec. 18, 2008. The amount of CO2 kept from the atmosphere is estimated at 20 tons per year.
"Achieving Comparable Effort through Carbon Price Agreements"
December 18, 2009
Belfer Center Programs or Projects: Harvard Project on Climate Agreements
Allowing for a price collar within a policy focused on long-run cumulative emissions targets is an effective and politically viable way to move international negotiations on climate policy forward. The economic uncertainty surrounding target commitments is enormous and combining a clear cumulative emissions target with a price collar optimally balances the environmental objective with the need to ensure that commitments remain feasible. Using plausible assumptions, the example in this paper illustrates how a price collar does this.
Focusing exclusively on reductions from historical emissions as the only meaningful form of commitment has greatly hampered negotiations on climate commitments, especially for developing countries where the uncertainty about the future and the cost is greatest. In contrast, the price collar can ease major developing countries into the system by allowing them to adopt only a price floor in the early years. It also offers a transparent and verifiable assurance of the comparability of effort across countries. Further, parties can design price collars so that they have no effect if predictions about the level of effort required to achieve a target are correct.
Incorporating price-based commitments into the treaty along with an emissions goal also demonstrates compliance during, as well as after, the commitment period.
Warwick J. McKibbin, Centre for Applied Macroeconomic Analysis, Australian National University; Adele Morris, The Brookings Institution; and Peter J. Wilcoxen, Center for Environmental Policy and Administration, Maxwell School, Syracuse University
Viewpoints present policy proposals, considered opinions, and commentary by distinguished policymakers, leaders from business and nongovernmental organizations, and scholars. The Harvard Project on International Climate Agreements does not advocate any specific climate change policy proposals. Statements and views expressed in Viewpoints are solely those of the authors and do not imply endorsement by Harvard University, the Harvard Kennedy School, or the Harvard Project on International Climate Agreements.
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