A method to finance a global climate fund with a harmonized carbon tax
Funding a response to climate change after Kyoto will require another look at both burden sharing and funding mechanisms. After reviewing the risks of cap-and-trade with carbon offsets and the advantages of a harmonized carbon tax, a method is proposed to utilize a harmonized carbon tax to finance a global climate fund. A common carbon tax rate is assessed across all nations and collected internally for internal investments in climate change. Financing for the global climate fund is generated from transferring a percentage of the collected carbon tax based on historical responsibility for carbon emissions and national wealth. Collected revenue is disbursed for climate aid based on a set of national climate need factors for adaptation, preserving strategic carbon sinks, low-carbon infrastructures and population management. In the interest of distributive justice, nations themselves determine the need factors of each other. Unlike cap-and-trade, this method does not explicitly require emissions caps. Formulas are presented for collection and disbursement, which require parameters for a globally harmonized carbon tax rate, a climate fund contribution rate, a national wealth threshold for fund contributions and need factors for each nation. Published economic and emissions data are used with the formulas to demonstrate an example of how the financing can work. This presents an equitable way to address climate needs across all nations on both a global and regional level.
|Date of creation:||30 Nov 2010|
|Date of revision:|
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- Frank Ackerman, 2008. "Carbon Markets and Beyond: The Limited Role of Prices and Taxes in Climate and Development Policy," G-24 Discussion Papers 53, United Nations Conference on Trade and Development.
- Hufbauer, Gary Clyde & Kim, Jisun, 2009.
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Economics Discussion Papers
2009-20, Kiel Institute for the World Economy (IfW).
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