IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Bridging the Gap: Integrating Price Mechanisms Into International Climate Negotiations

Listed author(s):
  • Warwick J McKibbin
  • Adele C Morris
  • Peter J Wilcoxen

The Parties to the United Nations Framework Convention on Climate Change (UNFCCC) continue their efforts to forge a new binding international agreement by 2015. The negotiations face daunting odds, but the 2009 Copenhagen Accord's shift towards heterogeneous national commitments was a positive step forward for climate policy. The prior presumption that binding commitments could only take the form of a percentage reduction relative to historical levels alienated rapidly industrializing countries and led to unproductive disputes over base years and other issues of target formulation. However, the disparate approaches now under discussion complicate comparing the likely emissions reductions and economic efforts required to achieve the commitments. This paper makes two points. First, we offer good reasons and ways to adapt international negotiations to allow for price-based commitments. The economic uncertainty surrounding target-only commitments is enormous. Combining a clear cumulative emissions target with limits on the cost associated with achieving the target would balance the environmental objective with the need to ensure that commitments remain feasible. This economic insurance could foster greater participation in the agreement and more ambitious commitments. Specifically, we suggest that in addition to their cumulative emissions targets for the 2013 to 2020 period, major economies could agree to a price collar on greenhouse gas emissions in their domestic economies. This would include starting floor and ceiling prices on a ton of CO2 and a schedule for real increases in those prices. All major parties would need to show at least a minimum level of effort regardless of whether they achieve their emissions target, and they would be allowed to exceed their target if they are unable to achieve it in spite of undertaking a high level of effort. The paper provides an example of how a price collar would work in the US context under a cap-and-trade system. Second, analyzing proposed climate commitments in terms of their implied economic stringency, as measured by the implied price on carbon necessary to achieve the targets, offers transparent and verifiable assurance of the comparability of effort across countries. It possible to calculate carbon price equivalents of climate commitments in a conceptually similar way to the tariff equivalents used in international trade negotiations. In sum, the lack of transparency in the level of effort involved in achieving particular emissions targets highlights the potential value of allowing for price-based commitments and argues for greater economic transparency in the international negotiation process.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-55.

in new window

Length: 21 pages
Date of creation: Dec 2012
Handle: RePEc:een:camaaa:2012-55
Contact details of provider: Postal:
Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601

Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Frank Jotzo, 2010. "Comparing the Copenhagen Emissions Targets," CCEP Working Papers 0110, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  2. Warwick J. Mckibbin & Adele C. Morris & Peter J. Wilcoxen, 2011. "Comparing Climate Commitments: A Model-Based Analysis Of The Copenhagen Accord," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 79-103.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2012-55. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.