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Climate change: towards a global carbon price coalition?

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In the run-up to the 2015 Paris-Climate Conference, the Climate Economics Chair (CEC) at Paris-Dauphine University and the Toulouse School of Economics (TSE) have launched a joint initiative to mobilise economists to highlight the role of economic instruments and carbon pricing in any international agreement, the only real incentive to reduce greenhouse gas emissions. A working seminar was held on June 4, 2009, bringing together Jean TIROLE, Nobel Prize winner in Economics and Christian de PERTHUIS, President of the Climate Economics Chair at the University Paris Dauphine, on the economic stakes of COP21, at the Ministry of Ecology, Sustainable Development and Energy, marking the official launch of this joint CEC/TSE project.

On 13 May, the Council agreed on the compromise reached with the European Parliament on the European carbon market stability reserve, which should allow a more sustained and therefore more stable carbon price in order to strengthen the emissions trading system.
Since the establishment of the Kyoto Protocol in 1997, many initiatives to establish carbon markets have been launched around the world, most notably the European carbon market. Since 2005, the share of global emissions covered by a trading scheme has increased by 73%. 2014 has been a particularly active year with the launch of discussions on structural reforms for the European carbon market, the implementation of the "Regional Greenhouse Gas initiative" (RGGI) carbon market reform in the United States, the effective connection between the Californian and Quebec markets, the launch of pilot markets in China, etc.
In early 2015, China announced the launch of its domestic carbon market in 2016 and the Canadian Province of Ontario may also launch its market. All of these initiatives, by covering more and more emissions, would allow the implementation of a carbon price and the economic consideration of climate change. They would also serve to facilitate discussions at the international level.
In total, therefore, 17 carbon markets representing 40% of global GDP and 11% of emissions would be currently implemented as a tool to reduce greenhouse gas emissions.

What is it really about?

According to the magazine Slate.fr, "To have a serious climate policy, we may one day have to have people pounding on the table."; remarks made by Roger Guesnerie, professor at the Collège de France, during this working seminar with Jean Tirole and Christian de Perthuis, who, for their part, would have been more "diplomatic"...
What tools should be put in place to ensure that the fight against global warming is effectively launched? Jean Tirole believes, in disagreement with Roger Guesnerie, that the carbon tax is a "very important tool" for the fight against climate change. "This system is difficult to control at the international level and prefers the market solution of "cap and trade": each country is authorised to distribute a certain (capped) amount of emission rights that economic agents buy and resell according to their needs. »
The general idea would be to determine and implement an international fixed price for carbon. According to the World Bank, This is already the case today in some 40 countries and more than 20 cities, states and provinces using or considering the use of carbon pricing to reduce their GHG emissions. Together, the schemes in place are estimated to be worth nearly $50 billion, according to the latest edition of the new Carbon Pricing WatchThe report announces the upcoming release of the State and Trends of Carbon Pricing, an annual publication on the status and trends of carbon pricing.

"Adequate carbon pricing is an essential, albeit insufficient, component of a package of measures that can reduce emissions and promote the transition to a low-carbon economy and a more resilient world, said Rachel Kyte, World Bank Group Vice President and Special Envoy for Climate Change. "It makes pollution more costly, provides incentives for energy efficiency and clean production, and sets business leaders and investors on a long-term path. »

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An idea supported by business: at Climate Week in Paris on 18-21 May and at the Carbon Expo in Barcelona, business leaders debated the price of carbon and called for the wider use of robust and effective pricing mechanisms. They considered carbon pricing to be an essential component of a sustainable development strategy. of the necessary package of measures to encourage more sustainable choices.

The European directive of 21 May 2015 which establishes an emissions trading scheme requires at least half of the revenue from an international carbon price to be allocated to climate and energy projects: energy efficiency, renewable energies, research and sustainable transport, for example. The full version of the report State and Trends of Carbon PricingThe report, which will be published before the international climate negotiations at the end of the year, is expected to provide more detailed information and in-depth analysis of the impact of carbon pricing schemes and their beneficial implications for international cooperation. 

 

- Read " Le climat, à quel prix " by Christian de Perthuis and Raphaël Trotignon - Editions Odile Jacob

 

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