Coalition-building for CO2 pricing beneficial for egoistic countries
A new study, co-authored by the MCC, finds that participation in carbon pricing systems pays off even for countries that act egoistically—if climate pioneers go ahead.
If climate pioneers go ahead, the egoistic countries temporarily enjoy the benefits of avoided climate change without paying for it, but in the longer term can join the pioneers and link to their already established models of CO2 pricing. Forming larger and larger coalitions reaps additional benefits of avoided damages from climate change. These benefits, even though unequally distributed across the coalition members, can be distributed via financial transfers. This makes it attractive to join even for egoistic countries.
“As for the pioneer coalitions for CO2 pricing, they’re not a bold assumption – they already emerge” says Ulrike Kornek from the MCC. “In the context of the European Union, France recently started a discussion on implementing a minimum carbon price together with a coalition of like-minded European countries such as, hopefully, Germany. This is closely observed by China, which is building up an emissions trading system of its own. In the Americas, California – the sixth biggest economy in the world – has a minimum carbon price and has agreed to link its climate policy with Ontario and Quebec. So, this is spreading – and increasing current carbon prices is the next step to adhere to the temperature goals of the Paris agreement.”