Core Principles for Carbon Pricing

This report made its debut during the UN Secretary General’s Climate Summit, at UN Headquarters in New York City, on September 23, 2014. It was then presented as the core of the Pathway to Paris Project, during a launch event that evening. You can download a PDF of the full whitepaper, including notes or view the full whitepaper and notes as an embedded ebook on Issuu.com (as seen above).

As impacts from global climate change gather force and escalate, a network of partners across the world is looking to secure an effective agreement in Paris, at the end of 2015, to stave off catastrophic climate disruption. The “bundle of everything” strategy for global treaty negotiations has not given us a true global solution.

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So, Citizens’ Climate Lobby launched an initiative to bring stakeholders into the process of decision-making, build connections between organizations, governments, individuals and enterprise, and mount a coalition effort to secure an agreement to motivate carbon pricing country by country that follows five Core Principles:

  • A steady, resolute and rising carbon price.
  • Internalizing costs incrementally, steadily and with no leakage.
  • Simple, transparent, effective at reducing emissions.
  • Building economic value at the human scale.
  • Easy to implement: country by country, harmonizing across borders.

Below, you will find updates relating to the journey these principles have taken from their initial introduction to playing a role in how the Paris Agreement envisions and motivates carbon pricing policies at the national and regional levels.


World Bank / IMF Commit to Carbon Pricing, Stakeholder Engagement

October 16, 2014

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During a Civil Society Town Hall Meeting at the World Bank in Washington, DC, we challenged both IMF Managing Director Christine Lagarde and World Bank President Jim Yong Kim to commit to:

  1. Support citizen engagement as a vital tool for best-results policy design, and…
  2. Support carbon pricing as the most efficient and effective way for any nation to reduce carbon pollution.

Both committed publicly to be more open to stakeholder and broader public engagement in policy design and to support putting a price on carbon. It became evident there was a need to build a multilateral coalition of support for carbon pricing and that citizens should have a voice.


Lima: More Affordable, More Effective

December 12, 2014

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During the COP20 in Lima—without active consideration of prescriptive carbon pricing language for the global negotiating text—a diverse and spontaneous coalition of leaders, advocates, organizations, and negotiators, began to repeat the refrain that a well-designed price on carbon is the essential policy choice for making all other areas of climate action more affordable and more effective.


Full-Spectrum Climate-Smart Finance

May 25, 2015

 A week before 195 nations gathered in Bonn for the next round of ADP negotiations, to refine the draft text of the Paris Agreement, at the Climate Finance Day in Paris, UNFCCC Executive Secretary Christiana Figueres told a room full of finance ministers, central bank governors, and financial sector leaders that the idea of climate finance was too narrowly construed. She called for a comprehensive transition to an economy in which no part of the financial system generates climate damage. Throughout the day, discussion continually turned to economically efficient policy approaches that could motivate such a transition.


Climate Summit of the Americas

July 14, 2015

During the Climate Summit of the Americas, multiple representatives of Canadian provincial governments set a new standard for defining carbon pricing options, by listing the available choices as “cap and trade, revenue neutral carbon tax, or carbon fee and dividend“. The RNCT or CF&D were recognized as administratively efficient and of wide economic benefit, while cap and trade was seen as a way for subnational jurisdictions to link to influential markets, backed up by committed governments, like California.


Accelerating Carbon Pricing: The ‘FASTER’ Principles

September 21, 2015

The FASTER Principles—laid out by the World Bank and OECD, with consultation from the IMF and the other founding strategic partners designing Carbon Pricing Leadership Coalition—aim to establish 6 universal principles for successful carbon pricing, built on:

  • Fairness
  • Alignment of policies and objectives
  • Stability and predictability
  • Transparency
  • Efficiency and cost-effectiveness
  • Reliability and environmental integrity

For the first time, global intergovernmental institutions have established that the most efficient way to price carbon may be through straightforward fees, and that socially equitable outcomes can be secured through fiscal dividends. The phrasing of the FASTER Principles clearly echoes the conceptual direction and phrasing of the Pathway to Paris Core Principles.


E3CP: Effective, Efficient, Equitable

November 27, 2015

Our Carbon Pricing Workstream has translated the Core Principles and its own draft language for the Paris Agreement into three simple requirements that would allow any nation to develop and deploy effective, efficient and equitable carbon pricing (E3CP) policies:

  • Effective in reducing economy-wide absolute emissions while supporting domestic economic growth across all sectors.
  • Efficient at minimizing the cost of implementation while maximizing environmental, economic and social co-benefits.
  • Equitable by avoiding disproportionate burdens and protecting vulnerable populations from unjust or negative economic or environmental impacts while building economic value at the human scale for individuals and their communities.

The E3CP letter—which calls on all Parties to the UNFCCC process to embrace these three requirements and support their addition to the text of the Paris Agreement and/or corresponding legal Decisions—has been signed by a diverse range of thought-leaders, including former US Sec. of State George Shultz, CCL Executive Director Mark Reynolds, Executive Director of Physicians for Social Responsibility Catherine Thomasson, Niskanen Center President Jerry Taylor, and others.


COP21 Launch of Carbon Pricing Leadership Coalition

December 1, 2015

On the first day of the COP21, there was an unprecedented step forward on one of the toughest issues facing negotiators. The Carbon Pricing Leadership Coalition is now part of the global policy-making environment. The Coalition includes governments, intergovernmental agencies, businesses and nonprofits, who all agree the world needs to be pricing carbon fairly, effectively and efficiently, as soon as possible.

The agreed mission, among the partners, is to ensure no nation misses the opportunity to add effective, efficient, equitable carbon pricing to its national climate strategy. As the Paris agreement will come into full legal force in 2020, the goal is to add carbon pricing to all national strategies by that time, to ensure the most cost-effective way to implement a true global response to climate disruption.


UPDATE: December 14, 2015

The Paris Agreement came to include key principles related to the Core Principles listed above. Specifically:

  • “environmental integrity [and] completeness” mean a policy-driven price must internalize costs, without glossing over real distortions embedded in a carbon-intensive market.
  • “comparability and consistency” mean prices may be designed country by country, but should harmonize across borders, and align with priorities such as reducing emissions and equitable outcomes.
  • “transparency, accuracy” and “[no] double counting” mean carbon prices cannot be designed to extend or expand negative externalization, and reductions must be demonstrably “additional”.

In 2016, the CPLC, the CCEN, and 195 nations working through the UNFCCC process, will now have the opportunity to build carbon pricing strategies appropriate to national circumstances but guided by these fundamental principles of environmental integrity, policy coherence, transparency, environmental effectiveness and social responsibility.

To understand the significance of this opportunity, it is crucial to recognize that for the first time in world history:

  1. we have a global agreement that requires all countries to take real and transformational action to reduce carbon pollution, and…
  2. that agreement sets real standards that require carbon pricing to be effective, transparent, and equitable.

4 Actionable Priorities for Accelerating Carbon Pricing Implementation

December 14, 2016

In Marrakech, the work of implementing the Paris Agreement moved forward in important ways. The Carbon Pricing Leadership Coalition and the World Bank are supporting a new blue-ribbon commission chaired by Lord Nicholas Stern and by Nobel Economics Laureate Joseph Stiglitz. The commission will study critical questions relating to innovation and deployment of optimal carbon pricing solutions, to ensure at least 50% of global emissions will fall under intensifying carbon pricing policies—supporting global action—by 2025.

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There are four crucial ways the work of this commission can motivate the wider and deeper activation of the Core Principles outlined on this page, for optimal carbon pricing policy design, attuned to the unique needs and capabilities of any jurisdiction:
  1. Alignment: There is going to be a real need to think about how different policy mechanisms “talk to each other” without necessarily expecting trading to be the language. There was a lot of talk in Marrakech about needing to support jurisdictions that want carbon taxes, or that are simply not technically able to execute cap and trade, and to facilitate their “interlinking” and “policy alignment” in ways that strengthen the capabilities of each jurisdiction.
  2. Revenues: It is clear there is a real and functional need for jurisdictions without deep experience in macroeconomic policy management to not only mobilize for that in terms of getting prices right, but also to understand how the best possible long-term fiscal infrastructure outcomes can accrue from use of revenues… rate reductions versus dividends, versus targeted investment, etc.
  3. Catalyzing investment: Increasingly, the discussion surrounding climate finance is about moving the entire financial sector off of harmful practices. Major US banks have been talking about 1/12 of annually traded bonds being $1 trillion, and aiming for that as a first step toward full “scrubbing” of the financial sector. How can optimally deployed carbon pricing policies, across an increasing number of jurisdictions, catalyze the maximum possible flow of clean investment?
  4. Subsidy shift: Increasing attention seems to be moving to the G7 and G20 commitments to shift away from “wasteful fossil fuel subsidies” (the key word being “wasteful”, which leaves very much open the question of what % of FF subsidies would be targeted). This part of the overall price signal provides hard numbers with which to talk about each of the 3 above items, in concrete ways.

Throughout 2014, we built on the outcomes of many discussions between citizens, stakeholders, policy advocates, and policy-makers, which led to the draft whitepaper, which would eventually become the Pathway to Paris whitepaper, in Sept. 2014. Below is a link to the original draft whitepaper presentation, which lays out some of this background.


Detailed Background: The Draft Whitepaper Presentation

April 11, 2014

The session was an intimate seminar discussion designed to introduce a draft whitepaper outlining a 2-step global climate solution. We focused on implementing a carbon price first, to transform national and regional energy economies, then on creating a more effective (due to carbon pricing) mechanism for funding needed climate response and deployment of new technologies. [Full report]


Carbon Pricing Workstream

Always Active

For more information about the evolution of carbon pricing policy planning and implementation, visit the Carbon Pricing Workstream page where you can get news, join meetings, and explore the workstream’s detailed Memory Bank and bibliography.

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About The CCEN Team

The Citizens’ Climate Engagement Network is a new global framework to support and expand direct citizen and stakeholder engagement in the intergovernmental climate negotiating process. It emerged from the Pathway to Paris project—with the support of Citizens’ Climate Education and Citizens’ Climate Lobby, in collaboration with the UN Millennium Campaign and the World We Want platform. The foundational structure was announced on October 25, 2015, during the Minneapolis 2015 Climate Action: Last Stop Before Paris, and the COP21 in Paris is the venue for its global launch. Everyone is welcome to participate in the shift to a thriving climate future.