Proposal for an International Carbon Price Floor Among Large Emitters

Staff Climate Notes, June 18, 2021

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Countries are increasingly committing to midcentury ‘net-zero’ emissions targets under the Paris Agreement.
Limiting global warming to 1.5 to 2°C requires cutting emissions by a quarter to a half in this decade.
Achieving sufficient progress to stabilize the climate requires ratcheting up near-term mitigation action, but doing so among 195 parties simultaneously is proving challenging.
Reinforcing the Paris Agreement with an international carbon price floor (ICPF) could jump-start emissions reductions through substantive policy action, while circumventing emerging pressure for border carbon adjustments.
The ICPF has two elements: (1) a small number of key large-emitting countries, and (2) the minimum carbon price each commits to implement.

The arrangement can be pragmatically designed to accommodate equity considerations.
The arrangement can accommodate emissions-equivalent alternatives to carbon pricing.
The paper discusses the rationale for an ICPF, considers design issues, compares it with alternative global regimes, and quantifies its impacts.

Subject: Carbon tax, Climate change, Environment, Greenhouse gas emissions, Taxes
Keywords: alternatives to carbon pricing, Carbon tax, Climate change, Climate change, design issues, emissions target, emissions-equivalent alternative, equity consideration, Global, Greenhouse gas emissions, IMF staff climate note, international carbon price floor, large emitters, mitigation, Paris Agreement