Docking into a Global Carbon Market: Clean Investment Budgets to Finance Low-Carbon Economic Development

THE ECONOMICS AND POLITICS OF CLIMATE CHANGE, Oxford University Press, 2009

35 Pages Posted: 27 Mar 2009

See all articles by Gernot Wagner

Gernot Wagner

New York University (NYU) - Department of Environmental Studies; New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Nathaniel O. Keohane

Yale University - School of Management

Annie Petsonk

Environmental Defense Fund

James Wang

Environmental Defense Fund

Date Written: March 17, 2009

Abstract

Financing the transition to low-carbon economic development must be the focus of any framework to encourage developing countries' participation in the global carbon market. It needs to do so with the aim of eventual full participation in carbon markets while maintaining the core market's integrity and meeting the environmental goal of avoiding long-term warming in excess of 2 degrees C above pre-industrial levels. This paper proposes a mechanism to achieve these goals: Clean Investment Budgets (CIBs).

Under this proposal, emerging economies could adopt binding limits on greenhouse gas emissions, set above current levels but within economic and environmental constraints. Such a step would enable these nations to access carbon finance immediately and far more efficiently than existing and proposed mechanisms. Moreover, the growth increment - the portion of the CIB in excess of a nation's actual emissions - provides a pool of readily available emissions allowances that could be leveraged in carbon markets, financing investments in renewable and low-carbon energy generation, energy efficiency, and technology transfer. CIBs would thus reward early action taken by emerging economies, providing them with a source of capital to enable a rapid transition to a low-carbon economic development path.

Keywords: climate change, carbon finance, clean investment budget, low-carbon, development, developing countries

JEL Classification: F3, Q28

Suggested Citation

Wagner, Gernot and Keohane, Nathaniel O. and Petsonk, Annie and Wang, James, Docking into a Global Carbon Market: Clean Investment Budgets to Finance Low-Carbon Economic Development (March 17, 2009). THE ECONOMICS AND POLITICS OF CLIMATE CHANGE, Oxford University Press, 2009, Available at SSRN: https://ssrn.com/abstract=1369402

Gernot Wagner (Contact Author)

New York University (NYU) - Department of Environmental Studies ( email )

285 Mercer Street
New York, NY 10003
United States

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

Nathaniel O. Keohane

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Annie Petsonk

Environmental Defense Fund ( email )

1875 Connecticut ave
257 Park Avenue South
Washington, DC 20009
United States

James Wang

Environmental Defense Fund ( email )

1875 Connecticut ave
257 Park Avenue South
Washington, DC 20009
United States

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