PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

PAGE 1 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

! Building a Coalition of the Working to Secure a Paris Agreement that meets these standards:

! • • • • •

!

A steady, resolute and rising carbon price.1

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.

2-step Economically Efficient Global Climate Policy

!

Because the "bundle of everything" climate negotiation strategy has not achieved these results, we will look at a simpler approach. We use here, as an example of a policy that can meet the above requirements, the revenue-neutral Carbon Fee and Dividend2 proposal Citizens' Climate Lobby advocates for in the United States and elsewhere. This analysis assumes countries will explore different policies; our purpose here is to focus on the value of setting the above standards.

!

We will need to both price carbon and enact a coordinated strategy for financing responses to impacts, resiliency-building, and innovation initiatives, wherever such financing is needed. So the core of any Paris agreement that is both viable and effective has to include:

!

• A price on climate-forcing emissions, with revenue return that drives market-wide change3;

• A global Climate Impact Response Fund(s) for disaster response & adaptation.4

!

Economic Inviability of an Unhealthy Market

!

It is no longer mathematically viable5 to build our economic framework around combustible hydrocarbon fuels. Emissions of carbon dioxide and other climate-forcing compounds (such as methane) are altering the Earth's atmosphere6, warming the oceans7, and destabilizing the global climate system.8 The cost of inaction9 is already unaffordable10, and will only escalate11, over time.

!

A Healthy Market Solution

!

The most economically efficient way12 to speed the transition away from carbon-emitting fuels, reduce the pervasive carbon asset risk13 facing the world economy, and avert the worst impacts of global climate destabilization, is to directly tax carbon-emitting fuels14, at the point

PAGE 2 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

of entry into the marketplace (the well, the mine, the port of entry) and return 100% of revenues to households. Such a solution spans the entire marketplace, sends a clear price signal15 to institutional investors, major consumers and government policy makers, and allows consumers to drive the transition16 to smart, clean, efficient renewable energy sources. At the right price, with a 100% dividend, such a policy can reduce emissions to 90% below 1990 levels17, by 2050, without provoking economic slowdown18 or putting polluters' responsibility on ordinary people and local economic actors.

!

Global Climate Impact Response Fund (CIRF)

!

Globally, we are already seeing catastrophic climate impacts19 that cost tens of billions of dollars20 to address. Both economic reason21 and political morality22 demand that we establish a global climate impact response fund (CIRF), to provide immediate assistance to those threatened by extreme events23 flowing from the destabilization of our climate system, and to help develop climate-safe energy technologies that will liberate humanity from the hydrocarbon trap.24

!

Officials from New York and New Jersey25, which suffered the worst storm damage in their history26 when Superstorm Sandy made landfall, are pushing for the creation of just such a fund in the United States, due to the political hazards27 of waiting until after a catastrophic event to request emergency relief and restoration funding. Globally, the problem is different, and more urgent; across the world, the people most likely to suffer grievous harm28 from climate destabilization have little to do with the global output of climate forcing emissions.

!

As such, it is morally imperative that the more affluent, high-polluting nations of the world provide assistance to those less affluent, highly vulnerable nations, when they face catastrophic climate impacts. Failure to provide aid to remote and underserved areas of the central Philippines, for instance, where hundreds of thousands of people now face a complex array of mortal threats29 from the impact and aftermath of Supertyphoon Haiyan, will cost the Philippines and the world far more than addressing the crisis directly, immediately and with maximum cost-efficacy.30 When Small Island Developing States incur repeated severe impacts or the long-term effects of persistent sea level rise, the result can be the displacement of entire populations, with significant added cost to countries that need to assimilate entire nations as refugees.31

!

It is more efficient, both economically32 and in service of strategic security priorities33, for highly industrialized high-polluting nations to invest in a global CIRF mechanism. Doing so honors the moral commitment all people have to each other, and helps to secure a more humane and prosperous future for the global community.

! !

PAGE 3 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

The Policy Process

!

The two policies (a price on climate-forcing emissions, with revenue return, and a global climate impact response fund) may be molded into one unified climate stewardship strategy or they might be enacted separately. There are good economic and political arguments for both approaches.34 But both policies must be adopted, globally, if we are to achieve the most responsible and efficient framework for our global future.35

!

Economic Efficiency & Optimal Overlap

!

To achieve the most efficient possible deployment of serious climate stewardship policy, a fee and dividend plan36, or similarly efficient, effective, transparent and resolute carbon pricing strategy, should be enacted first of all. The sooner it is enacted the sooner we can start building reduced climate impacts37 into all responsible calculations regarding the global future. A CIRF mechanism is just as necessary38, because ad hoc funding for emergency response and long-term planning will exacerbate human scale impacts39, add inefficiencies and dramatically increase costs overall.40 This CIRF mechanism must be capable of addressing both emergency climate impact situations and building resiliency as we adapt our planning to include whatever climate impacts we have already set in motion.41

!

Timeline

!

The IPCC's 5th Assessment Report42 gives us 5 years43 to set in motion the comprehensive global transition away from all climate-forcing energy processes. We can build a strong economy, with expanded job creation, by correcting the market's failure to tell the truth about the costs we are paying44 for fossil fuel consumption, and ensuring the world is able to address major disasters45 flowing from the release of excess energy absorbed by Earth's atmosphere and oceans.

!

Cure vs. Palliative Care

!

If we don't apply the cure46 we know we have at our disposal, a CIRF-only approach will amount to providing only palliative care47, a pain-relief project with no cure in the mix. We need to apply the cure first (a price on carbon that meets the standards that open this paper) and then move to recuperative care (CIRF), in order to save the patient.48

! ! ! ! !

PAGE 4 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

END NOTES

! 1. Steady, resolute and rising… !

A carbon price—whether by carbon tax, straight permitting, or licensed emissions trading— needs to send a clear price signal to investors, financial managers, lenders, government and industry, so that future investments move steadily away from practices that undermine the conditions for human thriving and sustainable economic advancement. Without a built-in rise in price, the carbon pricing mechanism cannot guarantee a reduction in emissions. If the policy is easily reversed, the resulting uncertainty can slow investment in alternatives and blur the lines of action through which the solution becomes possible.

! 2. Our example: Carbon Fee and Dividend… !

A Carbon Fee and Dividend plan is a flavor of revenue-neutral carbon tax (RNCT), but differs in both mechanism and impact from other forms of RNCT. A fee is applied all the way upstream, at the source, and 100% of revenues are returned directly to households in equal shares through a monthly dividend, by check or direct deposit. The fee starts low and rises steadily. Citizens’ Climate Lobby proposes for the United States a fee starting at $15/ton of CO2equivalent emissions, rising at $10/ton/year; a study conducted by Regional Economic Models, Inc. (REMI), released on June 9, 2014, modeled—across 160 sectors of the US economy—an upstream fee starting at $10/ton of CO2 emissions, rising at $10/ton/year. URL: http:// www.citizensclimatelobby.org/remi

!

The benefits of returning revenue directly to households are significant. Consumers have the leverage to either continue to consume as they would normally, while the market changes around them, or to make smarter choices and save. This means that while the Main Street economy can actually gather increased momentum, every dollar flowing through the economy carries an added incentive to achieve greater carbon efficiency, and capital has to compete to provide value to local economies that grow and better provide value to households, small businesses and communities. URL: http://poeteconomist.com/mainstreet

!

This whitepaper looks at Fee and Dividend not as the single solution for every country or every market, but as the simplest and most coherent expression of the core principles that must be met, if we are to implement effective carbon pricing, market by market, and country by country.

! 3. Revenue return that drives market-wide change… !

When fees are collected for introducing carbon-emitting fuels into a given market, the revenues can be used in a number of ways. It makes little sense to use revenues to pay for government programs, because the policy is intended to eliminate the source of the revenues—carbonemitting fuels—and so such an approach could build in unnecessary future fiscal difficulty. The

PAGE 5 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

revenues can also be returned to individuals and/or businesses, to help parties external to the fossil fuel business model cope with the rising cost of that business model. Some propose returning revenues as tax credits or even more indirectly as rate reductions. Citizens’ Climate Lobby’s proposal returns 100% of the revenues directly to households: 1) because giving revenue to households more efficiently allows their leverage to go to work in the marketplace, 2) because the unfairness of imposing rising fossil fuel costs on households that can’t afford them also has an economic drag effect, and 3) because it is simply a more direct administrative response, requiring no new bureaucracy or regulatory intervention.

!

Returning revenue, whether from carbon fees, permit sales or other excise taxes, motivates economic activity that might otherwise be dampened by rising costs. When the balance is struck between the right pricing mechanism and the right revenue return, the result is the optimal rate of transition-inducing change in market dynamics.

! 4. Climate Impact Response Fund(s)… !

Negotiations through the United Nations Framework Convention on Climate Change (UNFCCC) have led to the establishment of a Green Climate Fund (GCF), which could provide the most significant, robust and useful expression of what is described in this paper as a Climate Impact Response Fund or funding mechanism. The role of the GCF is described by the UN as follows:

!

“The Fund will contribute to the achievement of the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC). In the context of sustainable development, the Fund will promote the paradigm shift towards low-emission and climateresilient development pathways by providing support to developing countries to limit or reduce their greenhouse gas emissions and to adapt to the impacts of climate change, taking into account the needs of those developing countries particularly vulnerable to the adverse effects of climate change.” URL: http://www.gcfund.org/about/the-fund.html

!

The GCF is one way of meeting the need for a CIRF mechanism. We make no assumptions about whether or not the GCF is the best possible approach to meeting this need, but the general concept of a CIRF plan does fit well with the description cited above.

! 5. No longer mathematically viable... !

Throughout the history of our use of hydrocarbon fuels, we have externalized major segments of the routine cost of doing business. In the beginning, this made sense, because a new industry needs to build momentum and scale up. But now, with a fully mature global industry, continued externalization is adding not only those direct costs, but also a widening and deepening pool of unmanageable nonlinear degradations. This is no longer mathematically viable. Between the steadily escalating cost of compounding climate impacts and the vast economic opportunities we forego by continuing to finance our energy in this way, we are

PAGE 6 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

adding more cost than we can afford to bear and limiting our resources for coping effectively with the accelerating need for transition. See: http://www.ceres.org/press/press-clips/thelargest-risk-and-opportunity-investors-are-ignoring

! 6. Altering Earth's atmosphere... !

The climate system is a complex of thermodynamic energy transfers, moving between the Earth’s atmosphere and oceans. Our local experience of weather—hot summers, breezy autumns, monsoon rains, tropical cyclones, droughts, floods, blizzards and mudslides—is an expression of the way climatic forces play out over time. Earth's atmosphere is being changed to trap more heat, meaning the balanced climate system we are used to is becoming less reliable and will be still less reliable in the future.

! 7. Oceans... !

As more thermodynamic energy gets trapped in the Earth’s atmosphere and oceans, the excess destabilizes patterns of energy transfer that sustain vital ecosystems. Those ecosystems sustain life as we know it. When the global climate system’s dominant patterns are destabilized, vast and complex new security risks emerge.

! 8. Destabilizing the global climate system... !

Throughout the entire history of the human species, Earth's climate system has remained remarkably stable, with defined climate bands, resilient jet stream wind currents and the deep ocean conveyor, working together to effectively assign to each region its distinctive and characteristic climate. As warming accelerates at unprecedented rates, across the planet, and the Arctic regions warm, that stable, defined climate system is being destabilized, causing rains to dislocate, drought to set in, and intense events to bring ever more intense impacts. Climate change is really a system-wide and escalating destabilization of patterns that have defined the human living space for as long as we have existed.

! 9. Cost of inaction... !

Inaction on climate is expensive. It is far more expensive than any of our options for reducing related threats. By delaying a comprehensive response, we build in unpredictable nonlinear impacts and escalating future costs. Inaction also causes us to lose valuable time; in order to make necessary adjustments at the pace required, the window for action closes and we have to act more quickly, dramatically increasing the costs of an effective transition. The IEA estimates that between 2012 and 2014, inaction added $8 trillion to the global future expenditure to transition on schedule. (The schedule is enforced by geophysical arithmetic; the longer it takes us to transition away from climate destabilizing practices, the costlier the

PAGE 7 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

impacts will become, meaning that we add to the cost both by letting the destabilization deepen and by delaying our response.

! 10. Already unaffordable... !

Superstorm Sandy plunged 21 states across the eastern United States into disaster conditions simultaneously. Supertyphoon Haiyan—a Category 7 tropical cyclone—registered as the most powerful storm system ever recorded, and caused unprecedented devastation to the region of the Philippines where it made landfall. Syria's 12-year long drought clearly contributed to the conflagration that has claimed 200,000 lives and displaced more than half the population of the country. None of these climate-borne disasters has been able to get the funding required to reverse the devastation or completely rebuild.

!

On Dec. 24 and 25, 2013, the small island nation of St. Vincent and the Grenadines lost 15% of its annual GDP in just 3 hours of rain and the resulting floods; such shocks throw into question the entire calculation for what a dollar of development aid is worth. Such volatility adds dramatically to any and all expense. URL: http://issuu.com/poeteconomist/docs/ svg_rapid_dala_report_0/0

! 11. Cost to escalate over time... !

Because climate change is a process of entropy—the degrading of reliable patterns that make Earth's climate livable in specific ways on specific terrain—and impacts from that destabilization tend to intensify already intense events, the cost of coping with those impacts escalates over time. The climate system being a complex of thermodynamic energy transfers, moving through interwoven systems, destabilization drives further destabilization, and costs escalate over time. Delaying action also causes costs to escalate, because the window of opportunity to avoid disaster narrows, requiring a faster rate of change.

! 12. The most economically efficient way... !

A straight upstream carbon tax, with revenue return to households, is the most economically efficient way to address the pervasive market failure to price carbon, because it reveals the cost where it originates, and makes sure the market is equipped to cope with the pass-through of the new costs. The result is that the newly revealed cost falls increasingly, over time, on the industry that generates it, and the economy keeps chugging along, doing what it needs to do to push ever more private investment capital into alternatives.

! 13. Carbon asset risk... !

Because most of the costs of doing business in carbon-based fuels have not been fully revealed through the market for money-value exchange, existing investments in carbon-based

PAGE 8 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

fuels are actually overinvestments, beyond what investors have intended and with lower potential returns than thought at the time of the investment. As we reveal hidden costs, that overinvestment is also revealed, and there is risk that carbon assets will decline in value, leaving a given portfolio worth less.

!

The prevalence of carbon asset risk is not, however, entirely contingent on carbon pricing. Carbon assets also incur risk due to existing market dynamics: by the mere fact that carbon assets have been treated as high-efficiency investments, the appearance of new investment options that actually do carry that efficiency value—such as low-cost solar photovoltaics— threatens to accelerate the rate of decline in value of carbon assets. Carbon asset risk is also driven by the steadily advancing perception, among institutional investors, that burning carbon-based fuels beyond the scientifically determined Global Lifetime Carbon Emissions Budget—outlined in the Working Group 1 report from the IPCC's 5th Assessment Report—is simply not an option.

!

As nations and major investors begin to diversify, businesses that depend almost exclusively on profits from the sale of carbon-based fuels for their revenues will have to respond to these market dynamics by diversifying their operations. Not doing so will leave any entity that remains overinvested in carbon-based fuels vulnerable to sudden shocks and a steady decline, over time, in both the capital they can access and the value of their holdings.

! 14. Carbon tax, at the source... ! There are a number of reasons for an upstream application of the carbon price:

!

1. It is the point at which hidden costs originate, so it is the place where the newly revealed cost should be first revealed; anything else would be less efficient... 


!

2. By applying a carbon fee all the way upstream, at the well, the mine or the port of entry to a given market, the authorities involved can limit their burden to monitoring only a few dozen or a few hundred firms: in large markets like the US, the European Union and China, a few thousand. In the US, by contrast, a change in income tax rates, up or down, requires monitoring of tens of millions of points of contact between the policy change and the activities of market players, in that case: taxpayers... 


!

3. By applying the fee at the source, the carbon pricing policy can be structured to make sure the burden of coping with newly revealed costs falls back on those entities that generate the cost; this is the only way to reliably ensure that impacts throughout the rest of the economy will have the virtue of incentivizing efficiency in a way that does not require new spending or subsidies.

! !

PAGE 9 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

15. Clear (and resolute) price signal...

!

The aim of carbon pricing is to reveal hidden costs and signal to investors that their choices need to change, if they want to be reliably investing in activities that generate added economic value. As in Note 1, above, the signal needs to be clear, with a high “signal to noise ratio”, and resolute, in that it will not be easily reversed by policy changes or whims of the economy or of market leading interests.

! 16. Consumers drive the transition... !

With revenues returned to households, businesses of all kinds can compete for consumer dollars by getting more efficient in their use of carbon-based energy. Consumers don't have to choose to move into new technologies; the marketplace supplies cleaner, more efficient alternatives, because consumers and businesses alike seek to reduce the carbon intensity of their activities.

! 17. 90% below 1990 levels by 2050... !

Analysis by the Carbon Tax Center shows a Fee and Dividend plan can get to 90% below 1990 levels by 2050. In fact, the plan was structured to hit that target. In June 2014, the economywide analysis released by REMI showed a 52% reduction in total US CO2 emissions, below 2005 levels (50% below 1990) within two decades. URL: http://citizensclimatelobby.org/remi

! 18. Economic benefit, not hindrance... !

What we see in study after study is that a well-structured carbon pricing policy would benefit the economy in a number of ways. Before we explore that fact in detail, we need to establish: a carbon tax is not distortionary: instead of adding inefficiency (distortion) to the marketplace for energy, it targets a vast market distortion (negative externalities), in order to reveal the true cost and build efficiency into market dynamics. The manner in which this is done determines the overall efficiency-building value of the policy. REMI showed, in June 2014, that a revenueneutral Fee and Dividend plan, implemented in the United States, would:

! • • • • • •

! ! !

increase household incomes

increase the labor share of income

facilitate sustained new hiring in locally sourced jobs

and create 2.8 million net new jobs in just 20 years

while adding $70 to $85 billion to GDP

and reducing carbon dioxide emissions at the rate required for climate stabilization.

PAGE 10 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

19. Already seeing catastrophic impacts...

!

Superstorm Sandy was the single most costly climate impact event to hit the United States, to date, affecting 21 states simultaneously and causing more than $100 billion in damage, most of which has not been funded with federal recovery assistance. Pervasive, persistent impacts are also occurring: more than 50% of the counties of the United States have been in a state of drought for some or all of the last 3 years. The depth and reach of the drought are worse than the 1930s, and land area that supplies more than 40% of the world's grain exports is under severe stress.

!

Supertyphoon Haiyan devastated Tacloban and the Visayas region of the central Philippines, also producing need for far more disaster relief funding than global assistance has been able to provide. Glaciers are melting across every continent, with melt in the Himalayas and the Hindu Kush already leading to catastrophic landslides, unprecedented rashes of downstream flooding, and the displacement of millions of people. For a deeper and more comprehensive accounting of sever climate impacts from around the world, please see the IPCC's 5th Assessment Report. URL: http://www.ipcc.ch/report/ar5/index.shtml

! 20. Multi-billion-dollar cost... !

Already, we are seeing a greater number of billion-dollar disasters, as well as chronic compounding impacts that are draining value from the world economy in complex ways.

! 21. Economic reason... !

We cannot build a resilient, prosperous, human economy, if we continue to face an escalating pattern of degradation of the natural systems that provide for and sustain life. The efficiency and consistency of a well-defined climate system has been integral to the development of human civilization across the Earth and throughout history.

! 22. Political morality... !

Political leadership is service. It can be well executed service, yielding good results for constituents, or it can be service poorly rendered, where officials muddle through haphazardly or even abuse power or degrade the situation of their constituents through neglect or corrupt behavior. If political process leaves us with massive hidden costs that degrade our future, that political process is failing us, morally. There is also an inescapable moral imperative not to add burdensome costs to the lives of people who have no way of seeking redress.

! ! ! !

PAGE 11 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

23. Climate Impact Response Fund to address impacts...

!

When disaster-scale events impose emergency costs, we have no choice but to respond. When our global energy economy generates negative externalities that come at us through the global climate system, events no one jurisdiction can foresee add costs that constrain budgets for needed services and development. Localized destabilization across a global climate system cannot be adequately addressed with local funds; such a strategy would be the least efficient possible response.

!

So, a global Climate Impact Response Fund (CIRF) or funding mechanism is a way to build efficiency into the global climate response.

!

Various such projects exist, undergirded by various agencies and governments and focused on achieving various elements of responsible long-term climate-smart development. As stated in Note 4, above, the Green Climate Fund might be the best overarching framework for CIRF planning and investment, but this paper does not take a position on that choice. What matters here is that a truly efficient and cost-effective response requires that we not only provide funding for worthy initiatives; we must also mitigate cost and risk to ensure that money invested in such initiatives is more capable of achieving the desired outcomes.

!

The question we examine here is: How much more affordable, effective, and value-generative are climate response funding mechanisms, once we have priced carbon?

! 24. The hydrocarbon trap... !

Hydrocarbon molecules are very effective storage devices for energy that can power industrial production, transportation and electricity generation. We have built an economy whose infrastructure facilitates the development, distribution and consumption of energy stored in hydrocarbon molecules. We spend more to facilitate these activities, at costs that seem affordable to most people. That appearance of affordability is reinforced by our not counting negative externalities in the market cost for using hydrocarbon molecules to produce energy.

!

Our economy tells us we are doing the affordable, efficient thing, and yet we are building pervasive and unaffordable costs into our own economic future. That contradiction is an economic trap: the lure of efficiency drives us into the least efficient behavior possible, degrading our ability to make better, smarter choices, when the time comes. The perverse incentive of false efficiency means degraded buying power pushes us away from smart investments in a changing energy economy, often leaving the most vulnerable communities with few ways out of the escalating cost of hydrocarbon dependency.

! ! !

PAGE 12 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

25. New York and New Jersey climate response...

!

When the most devastating storm system in US history made landfall, it left damages in New York and New Jersey that cost far more than the two states could commit to a serious response on their own. They were forced to turn to the federal government to request emergency disaster relief funding, to cope with damages from a storm whose unusual behavior and intense destructive force were made worse by chemical and physical influences flowing at them through a global complex of thermodynamic energy transfers—our climate system.

! 26. Superstorm Sandy... !

It is estimated that the total costs of the storm, to just New York and New Jersey, including the costs of building back better and achieving long-term resiliency, exceeded $100 billion. The two states joined together to request more than $80 billion in disaster relief response and longterm planning assistance. Pres. Barack Obama proposed $60.4 billion in federal assistance, weeks after the storm. The Senate approved the measure, but the House of Representatives would not adopt it. Ultimately, a plan to deliver $51 billion in federally funded disaster relief passed Congress and became the national plan. And while $51 billion can do a lot of good, it will not provide the full amount required to achieve a speedy recovery and to secure resilient long-term planning at an aordable rate.

! 27. Political hazards of waiting... !

By waiting until disaster strikes to build a strategy for addressing the crisis, leaders risk 1) not receiving the aid they need to heal communities, regions or even nations, and 2) being seen as having lost legitimacy, by not acting in service of the health and safety interests of real people and of their nations. And for nations, the destabilization of legitimacy at times of such deep crisis can lead to destabilization of political order itself.

! 28. The most vulnerable... !

The people living in the most vulnerable segments of the landscape of human civilization, with too little means to keep pace with global development, are the most directly vulnerable to climate impacts, even as they have contributed, and will continue to contribute, far less to anthropogenic carbon-induced global warming.

! 29. A complex array of destabilizing / mortal threats... !

Climate impacts are, by virtue of the planet-wide dynamics of the climate system, nonlinear, overlapping and unpredictable. When storms become more intense, and proliferate, and drought deepens and expands, and glaciers melt, and climate bands blur, as the Arctic, the Antarctic and the oceans warm, intelligent and cost-eective planning becomes steadily more

PAGE 13 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

elusive. Without mitigation, we will face a complex and compounding, unpredictable array of mortal threats to human wellbeing and even to the order of civilization itself.

! 30. Immediate action is more affordable... !

A functioning future economy and secure political environment are far more costly to achieve, if we don't act. Acting now costs far less than waiting. We know from economic studies published over the last year that pricing carbon now will build value, while failing to do so will "bake in" degrading future costs we cannot afford to cope with. The International Energy Agency found that inaction between 2012 and 2014 added $8 trillion globally to the cost of transitioning to a climate-safe economy. URL: http://www.iea.org/newsroomandevents/ pressreleases/2014/may/name,51005,en.html

! 31. Small Island Developing States... !

In Note 10, above, we note the catastrophic impact of extreme weather on the small island nation of St. Vincent and the Grenadines. There is also a more severe risk to many small island nations, which is the possibility that their entire population may need to evacuate, as sea level rise and related threats to human habitation escalate.

!

As early as 2001, the leaders of the low-lying Pacific island nation of Tuvalu initiated a plan to evacuate their entire population to another country’s territory, in the event that sea level rise could not be stopped in time to save their homeland. URL: http://www.earth-policy.org/ plan_b_updates/2001/update2

!

Tuvalu and other Small Island Developing States (SIDS) have developed far-reaching climate impact adaptation strategies, which include measures as comprehensive, costly and final as emergency relocation of their entire populations: http://www.undp-alm.org/resources/napsleast-developed-countries-ldcs/tuvalu-national-adaptation-programme-action-napa

! 32. Economic efficiency... !

Carbon pricing is inherently efficient, because it eliminates vast inefficiencies flowing from the burning of carbon-based fuels. Direct, transparent carbon pricing, with revenue recycling, is still more efficient, because it ensures that while leverage-depleting activities are reduced over time, leverage also accrues to consumers, requiring the market to compete for new income by getting more efficient.

! 33. Strategic and geocollaborative efficiency... !

Climate disruption is a major threat to geopolitical peace and security. Severe, nonlinear and escalating impacts from climate disruption add significant costs to the work of maintaining the

PAGE 14 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

basic underpinnings of the human economy, risk blurring political borders, destabilizing governments and major segments of the global economy. URL: http://climateliberty.org/cna

!

Pricing carbon is not only cost-effective for government, industry and communities, it is the most efficient way to provide for a future in which security priorities can be achieved and nations can more effectively plan collaborations that build resources and momentum for shared sustainable prosperity.

! 34. Bundling vs. unbundling... !

There are reasons to consider keeping carbon pricing entirely separate from planning of climate finance mechanisms and related green economy-building investments. A carbon price is, by definition, a driver of increased economic efficiency, because it reveals hidden costs and lets the leverage of informed decision-making in the marketplace go to work to build value that is founded on enhanced efficiency, not on systemic degradations. In this light, pricing carbon will facilitate calculations about how then to respond to mitigation of climate impacts with more value in hand to do more good, more effectively.

!

There are also reasons to consider looking at the value of pricing carbon specifically—with attention to the increased overall value inherent in the efficiency-building force of the carbon price. Drawing funds out of the carbon pricing solution will slow the removal of pervasive market inefficiencies, but knowing inefficiencies will be removed by a well-crafted, steadily rising carbon price would allow for more precise calculations about what other policies can be expanded or curtailed, given changing market dynamics. So, related judgments about those policies could be made at the time the carbon price is planned and implemented.

! 35. Why both Price and CIRF... !

A price on carbon will improve the economy of a country that implements it, whether or not other countries follow suit, because it will build efficiency both in the market dynamics of that economy and by creating a strong incentive for efficiency-building business models. The climate system is global, however, and does not recognize political borders. Severe impacts can occur anywhere, so a strategy to address those impacts with real funding is part of any serious global strategy.

!

Without a strong carbon pricing policy, adaptation and resiliency-building efforts will be far less efficient. So, a Climate Impact Response Fund can only work effectively if it comes alongside of or after climate change mitigation is built into our economic future through a steady carbon pricing mechanism. URL: http://www.worldbank.org/en/news/feature/2014/09/22/ governments-businesses-support-carbon-pricing

! !

PAGE 15 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

36. First, an efficient, effective, transparent and resolute carbon price...

!

Without effective carbon pricing, negative externalities will continue to flow from the emission of heat-trapping gases.

! 37. Achieving reduced climate impacts benefits response funding... !

By mitigating the threat and the cost of climate disruption, response funding costs less, and funds for relief and resilience have more buying power.

! 38. CIRF coordination is needed... !

Facilitation of the most efficient and effective response is necessary to make sure we can achieve the best possible outcome. A haphazard agglomeration of funding mechanisms will add costs, unless there are standards that help to inform how, when and where, specific types of funding are deployed to deal most effectively with specific types of impacts or concerns. Coordination of CIRF policies is necessary, to guarantee both efficiency and effectiveness, but a core set of standards, coupled with a requirement for action, supported by real and enduring transparency, should be enough to achieve agreement.

! 39. Ad hoc climate response spending exacerbates human-scale impacts... !

Climate-borne stresses on the human population are made worse by ad-hoc climate response spending: because spending is less efficient, less is available at any given time, so responses cannot be planned as effectively, programmed over time, and built into standard procedure.

! 40. Ad hoc climate response spending increases costs overall... !

Costs escalate when response spending is not able to benefit from the accumulation of knowledge and best-practice planning. Inefficient planning means each incident costs more, and the value of every dollar moving through the system is reduced.

! 41. Responding to climate impacts already set in motion... !

Among the responses we need to prepare for are those that will address climate impacts already set in motion. We know we are building extreme events into our future climate experience, so we should be planning to cover the costs of these now. Economic analysis should learn to consider complex, nonlinear impacts, and the lost value inherent in resources undermined by prolonged climate disruption.

! ! !

PAGE 16 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

42. IPCC's 5th Assessment Report: Key Findings...

!

The IPCC's 5th Assessment Report quantifies the Global Lifetime Carbon Emissions Budget— the maximum we can burn before pushing global average temperature rise beyond 2ºC, and setting in motion truly unprecedented and unmanageable climate disruption. Read the full report here: URL: http://www.ipcc.ch/report/ar5/index.shtml

! 43. IPCC's 5-year timeline is now down to 4... !

The IPCC's Working Group 1 released its section of the 5th Assessment Report in September 2013. More than two years will have passed by the time the 21st Conference of Parties of the UNFCCC in Paris. The window of opportunity to enact meaningful effective solutions that will mitigate the risk of catastrophic climate impacts and climate-borne destabilization is closing. Delay is making future actions more expensive, because if they are too slow, they will saddle us with unmanageable future costs, and if we are to achieve the needed change within a narrower timeframe, we will need to spend more to accelerate the pace of change.

! 44. Market failure... !

The collective agency of a functioning market is supposed to reveal the price best suited to providing maximum benefit to all involved. When distortion is built into standard market dynamics, it is more difficult to see the true cost of certain activities. The unregulated dumping of heat-trapping gases into the Earth's atmosphere and oceans and the ensuing disruption of the global climate system are costs we do not price into the market's engagement with and deployment of carbon-based fuels.

!

This is a market failure on a scale not seen in world history. That market failure is a real cost, not a theoretical cost. Whether we pay that cost will not depend on whether we price carbon. We will pay these hidden (externalized) costs. Pricing carbon will allow us to deal with this hidden cost much more efficiently, so we can benefit from a market that tells the truth about cost. Achieving that goal will allow individuals, businesses, and governments, to act with much greater sovereignty over future economic outcomes. Resulting investments will yield better results and build more resilient, adaptable economies which empower far greater numbers of human beings in real ways.

! 45. Major future disasters... !

We are beginning to see climate-borne destabilization on a scale projections had anticipated would not come for decades. Compounding of climate impacts is accelerating the pace of destabilization. Future extreme impacts are expected to be still worse than what we are now experiencing. Again, inaction, or failure to mitigate, promises to cost far more than we are willing or able to spend.

PAGE 17 OF 19

PATHWAY TO PARIS: A GLOBAL STRATEGY TO PRICE CARBON

46. If we don't apply the cure...

!

We know that pricing carbon will reduce pervasive market distortions affecting human economies across the world. We know it will do this more efficiently than any other strategy we have to counter climate disruption. We know that all other climate response strategies will benefit from the efficiency gains inherent in effective carbon pricing. Until we internalize the costs of the carbon fuel business model to the industry and its investors, neither they nor the rest of society will be free to move enough capital into building the future economy on which the thriving of human society depends.

! 47. CIRF-only is palliative care... !

If we seek to avoid the pervasive and compounding costs of an unplanned, ad-hoc response to climate disruption by enacting only a CIRF strategy, we will be applying only palliative care, doing too little to rescue the patient from real danger. Such a strategy is likely not enough even to fully treat the symptoms; we need to take action to mitigate the harm caused by the disease. We can mitigate climate disruption, rescuing the world community from calamitous future costs, by pricing carbon efficiently, transparently and effectively, so that any CIRF strategy or combination of strategies can be made more efficient, more effective and more valuable for building a collaborative human future free of catastrophic climate disruption.

! 48. Roadmap to Climate Security... !

Fiekowsky, Peter; Robertson, Joseph. Roadmap to Climate Security. Geoversiv Envisioning, in collaboration with Citizens' Climate Lobby. February 2014. URL: http://geoversiv.com/roadmap

! ! ! ! !

!

PAGE 18 OF 19

! ! ! !

! ! ! ! ! !

PathwayToParis.org is a coalition-building project from Citizens' Climate Lobby, aimed at concentrating the attention of stakeholders and their oďŹƒcial representatives on the inherent value of serious carbon pricing policies for scaling up climate action from the national context to a global collaboration that benefits all nations.

!

For more information about the content of this report, the Pathway to Paris Coalition project and related events, contact Citizens' Climate Lobby's Global Strategy Director, Joseph Robertson, at jr@citizensclimatelobby.org

!

For media inquiries, contact Citizens' Climate Lobby's Communications Director, Steve Valk, at steve.valk@citizensclimatelobby.org

!

Learn more about Citizens' Climate Lobby's mission and work at CitizensClimateLobby.org