Carbon Pricing Options

Adriana Mugnatto-Hamu

adriana@danforthgreens.ca416-273-8247

Climate Change Conference 20102010 August 14

Carbon Pricing Options

Forget everything you know.

Carbon Pricing Options

1. Cap or tax

2. Protect high-emitters or not

3. Targeted oreconomy-wide

4. Auctioned or distributed

5. Revenue-neutral or funding source

6. Distribution options

7. Border adjustment options

8. At source or emission point

9. Offsets

10. Appropriate levels

11. Hybrids

12. A global deal

1. Cap or tax

Supply and demand curve

Cap or tax

Cap or tax

Good times and bad

2. Protect high emitters or not

Protect high emitters or not

Grandparenting

• What it is

• Why it's done

Protect high emmitters or not

Problems with grandparenting

• Emissions rise in evaluation period

• Perverse incentives

• Long time to implement

• Inaccurate market signal

Protect high emmitters or not

• Cap doesn't imply grandparenting

• Taxes can have similar problems

Protect high emmitters or not

Sweden's carbon tax at introduction

• $100 per tonne of CO2

• Industrial rate: 25%

• High-energy industry exempt

Protect high emmitters or not

• Prevent off-shoring

• Purpose of carbon tax

3. Targeted or economy-wide

Targeted or economy-wide

Advantages of economy-wide mechanism

• Cheaper

• More elegant, less bureaucratic

• Appropriate related market signals

4. Auctioned or distributed

Auctioned or distributed

Advantages of auctioning

• Faster

• Industrial emmissions don't go upin the evaluation period

• Appropriate rewards and punishments

• Accurate market signals

5. Revenue-neutralor funding source

Revenue-neutralor funding source

Reasons to avoid spending the revenue

• Tax grab

• Creating industry lobbies

• No reason to

6. Distribution options

Distribution options

• Income tax

• Dividend

• Quota

7. Border adjustments

Border adjustments

Border adjustments

Objectives

• Protecting Canadian market from imports

• Protecting market for Canadian exports

8. At source oremmission point

9. Offsets

10. Appropriate levels

11. Hybrids

12. A global deal

Carbon Pricing Options

1. Cap or tax

2. Protect high-emitters or not

3. Targeted oreconomy-wide

4. Auctioned or distributed

5. Revenue-neutral or funding source

6. Distribution options

7. Border adjustment options

8. At source or emission point

9. Offsets

10. Appropriate levels

11. Hybrids

12. A global deal