Existing estimates of optimal climate policy ignore the possibility that carbon tax revenues could be used in a progressive way; model results therefore typically imply that near-term climate action comes at some cost to the poor. Using the Nested Inequalities Climate Economy (NICE) model, we show that an equal per capita refund of carbon tax revenues implies that achieving a 2°C target can pay large and immediate dividends for improving well-being, reducing inequality and alleviating poverty. In an optimal policy calculation that weighs the benefits against the costs of mitigation, the recommended policy is characterized by aggressive near-term climate action followed by a slower climb towards full decarbonization; this pattern-which is driven by a carbon revenue Laffer curve-prevents runaway warming while also preserving tax revenues for redistribution. Accounting for these dynamics corrects a longstanding bias against strong immediate climate action in the optimal policy literature.
Decarbonizing the global energy system requires large‐scale investment flows, with a central role for international climate finance to mobilize private funds. The willingness to provide international finance in accordance with common but differentiated responsibilities was acknowledged by the broad endorsement of the Paris Agreement, and the Green Climate Funds in particular. The international community aims to mobilize at least USD 100 billion per year for mitigation and adaption in developing countries. In this article, we argue that too little attention has been paid on the spending side of climate finance, both in the political as well as the academic debate. To this end, we review the challenges encountered in project‐based approaches of allocating climate finance in the past. In contrast to project‐based finance, we find many advantages to spending climate finance in support of price‐based national policies. First, the support for international climate cooperation is improved when efforts of successively rising domestic carbon pricing levels are compensated. Second, carbon pricing sets incentives for least‐cost mitigation. Third, investing domestic revenues from emission pricing schemes could advance a country's individual development goals and ensure the recipient's ‘ownership’ of climate policies. We conclude that by reconciling the global goal of cost‐efficient mitigation with national policy priorities, climate finance for carbon pricing could become a central pillar of sustainable development and promote international cooperation to achieve the climate targets laid down in the Paris Agreement. WIREs Clim Change 2017, 8:e437. doi: 10.1002/wcc.437 This article is categorized under: Climate Economics > Economics and Climate Change Climate and Development > Decoupling Emissions from Development
The Paris Agreement (PA) sets out to strengthen the global response to climate change, setting targets for mitigation, adaptation, and finance, and establishing mechanisms through which to achieve these targets. The effectiveness of the PA’s mechanisms in achieving its targets, however, has been questioned. This review systematically maps the peer-reviewed literature on the PA, categorizing the available evidence on whether or not the ‘Paris Regime’ can be effective. We split our analysis into three methodologically distinct sections: first we categorize the literature according to the mechanisms being studied. We find a diverse body of literature, albeit with a clear focus on mitigation, and identify adaptation and capacity building to be clear gaps. Second, we carry out a content analysis, identifying common drivers of, barriers to, and recommendations for effectiveness. Here we find mixed evidence, with potential drivers often qualified by more concrete barriers. Thirdly, we use scientometrics to identify six research clusters. These cover loss and damage, finance, legal issues, international politics, experimental evidence, and studies on tracking progress on the PA’s targets. We conclude with a narrative discussion of our findings, presenting three central themes. First, transparency is widely considered a precondition for the PA to be institutionally effective. However, a lack of clear reporting standards and comparable information renders the PA’s transparency provisions ineffective. Second, environmental effectiveness relies on national ambition, of which there is currently too little. It remains unclear to which extent the Paris Regime structure itself can induce significant ratcheting-up of ambition. Finally, the PA facilitates the diffusion of norms, enables learning and the sharing of best practices. This production of shared norms provides the most promising avenue for overcoming the current lack of ambition. One of the primary successes of the PA is in providing a platform for the exchange of experiences and ideas.
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