Climate change is the great existential threat of our time. It is a challenge that spans our globe, with especially severe consequences for developing countries. Without mitigation action, temperatures are projected to rise by 4 degrees by the end of the century – with dire consequences. Despite international responses, codified i.e. in the Paris Agreement, emissions continue to increase, rapidly closing the door for achieving the internationally agreed target to stabilize global temperature increases to “well below 2°C”.
There is a growing consensus that carbon pricing is the most effective mitigation instrument. A credible carbon price is necessary to incentivize all the activities needed to make carbon-neutral activities more profitable and thus more likely. Recognizing this, the number of carbon pricing initiatives and jurisdictions has more than doubled over the past decade according to the World Bank’s Carbon Pricing Dashboard. In the Global South, however, there is relatively little experience with pricing approaches such as carbon taxes and even less with emission trading programs. There are major knowledge gaps relating to how such programs should be designed to meet the unique challenges of developing countries. Also, while being most vulnerable to climatic changes and related impacts, it is often politically and economically difficult not to invest in carbon emitting fossil fuels to cope with rapidly increasing energy demand that is often thought a necessary attribute to accompany “development”.
The Climate Emissions Pricing Initiative
To address the problem EfD is launching a new collaborative program in 2020, the Emissions Pricing for Development Program, aimed at creating a global community for research and engagement with policy makers to make sure everyone has the capacity to carry out appropriate analyses and design effective policies that are also politically acceptable.
EfD has a long track record of previous work with various aspects of climate economics and energy, but when it comes specifically to carbon pricing and experiences in different developing countries there has not yet been a systematic approach. This initiative builds on EfD’s previous experiences and has two important basic principles:
- It covers all the drivers of climate change.
- It covers all instruments that imply a cost for polluters.
EfD as a network of scholars and practioners all across the globe is in a unique position to deliver excellent research and at the same time foster science-policy dialogue at the highest level. Designing effective carbon pricing schemes is in particular dependent of mutual learning between policy makers and researchers. At the same time, our past experience from various countries shows that countries often do not have the capabilities to conduct the economic analyses necessary to understand the economic interactions of a carbon price, including its distributional consequences.
Our goals and research
Through this program the EfD strives to deliver policy impact and help leaders better understand and deal with the fiscal and environmental costs and benefits of climate change through developing a number of initiatives both in research, policy outreach and as mentioned capacity building.
Currently we propose the following five working packages (WP: s): WP1 will focus on understanding political acceptability of carbon pricing, distributional effects of pricing instruments and how they can be alleviated (e.g. by revenue recycling schemes). WP2 will explore how to deal with issues of competiveness and economic growth, the circumstances under which carbon prices can influence these and how potential impacts can be alleviated. WP3 will focus on how carbon taxes can be used to mobilize domestic resources. WP4 will assess the role of fossil interest lobbying and politics of coal for carbon pricing. Lastly, WP5 will focus on setting optimal carbon prices and will be conducted in collaboration with the IMF.
The Emission Pricing for Development Program is developed in collaboration with the Climate and Development group at MCC, the Center of Economic Policy Research (CEPR), researchers at the IMF, members of the RFF's Carbon Pricing Initiative, and Toulouse School of Economics (TSE).