- Traditional public climate finance interventions such as grants and concessional loans have not mobilized private capital at the scale needed to decarbonize the world economy consistent with the 2°C target, much less 1.5°C, and will likely face ongoing constraints in the future.
- Auctioned price floors – subsidies that offer a guaranteed price for future emission reductions – maximize climate impact per public dollar while incentivizing private investment in low-carbon technologies.
- This new subsidy instrument, if applied at scale via the Green Climate Fund and other domestic and international climate finance vehicles, can promote private sector competition to bring down technology costs and drive innovation, thereby supporting a longer term transition to regulation and sector- or economy-wide carbon markets.
- To facilitate the transition from public subsidy to the market-based support of climate mitigation, auctioned price floors should work in tandem with carbon pricing and complementary policies, using the same accounting and monitoring, reporting and verification toolkits.
Delivering emission reductions consistent with a 1.5°C trajectory will require innovative public financial instruments designed to mobilize trillions of dollars of low-carbon private investment. Traditional public subsidy instruments such as grants and concessional loans, while critical to supporting nascent technologies or high-capital-cost projects, do not provide the price signals required to shift private investments towards low-carbon alternatives at a scale. Programmes that underwrite the value of emission reductions using auctioned price floors provide price certainty over long time horizons, thus improving the cost-effectiveness of limited public funds while also catalysing private investment.
Taking lessons from the World Bank’s Pilot Auction Facility, which supports methane and nitrous oxide mitigation projects, and the United Kingdom’s Contracts for Difference programme, which supports renewable energy deployment, we show that auctioned price floors can be applied to a variety of sectors with greater efficiency and scalability than traditional subsidy instruments. We explore how this new class of instrument can enhance the cost-effectiveness of carbon pricing and complementary policies needed to achieve a 1.5°C outcome, including through large-scale adoption by the Green Climate Fund and other international and domestic climate finance vehicles.
Key policy insights
Global warming potentials (GWPs) have become an essential element of climate policy and are built into legal structures that regulate greenhouse gas emissions. This is in spite of a well-known shortcoming: GWP hides trade-offs between short- and long-term policy objectives inside a single time scale of 100 or 20 years (1). The most common form, GWP100, focuses on the climate impact of a pulse emission over 100 years, diluting near-term effects and misleadingly implying that short-lived climate pollutants exert forcings in the long-term, long after they are removed from the atmosphere (2). Meanwhile, GWP20 ignores climate effects after 20 years. We propose that these time scales be ubiquitously reported as an inseparable pair, much like systolic-diastolic blood pressure and city-highway vehicle fuel economy, to make the climate effect of using one or the other time scale explicit. Policy-makers often treat a GWP as a value-neutral measure, but the time-scale choice is central to achieving specific objectives (2–4).
The literature on the costs of climate change often draws a link between climatic ‘tipping points’ and large economic shocks, frequently called ‘catastrophes’. The phrase ‘tipping points’ in this context can be misleading. In popular and social scientific discourse, ‘tipping points’ involve abrupt state changes. For some climatic ‘tipping points,’ the commitment to a state change may occur abruptly, but the change itself may be rate-limited and take centuries or longer to realize. Additionally, the connection between climatic ‘tipping points’ and economic losses is tenuous, though emerging empirical and process-model-based tools provide pathways for investigating it. We propose terminology to clarify the distinction between ‘tipping points’ in the popular sense, the critical thresholds exhibited by climatic and social ‘tipping elements,’ and ‘economic shocks’. The last may be associated with tipping elements, gradual climate change, or non-climatic triggers. We illustrate our proposed distinctions by surveying the literature on climatic tipping elements, climatically sensitive social tipping elements, and climate-economic shocks, and we propose a research agenda to advance the integrated assessment of all three.
Proposed large-scale intentional interventions in natural systems in order to counter climate change, typically called “climate engineering” or “geoengineering,” stand to dramatically alter the international politics of climate change and potentially much more. There is currently a significant and growing literature on the international politics of climate engineering. However, it has been produced primarily by scholars from outside the discipline of International Relations (IR). We are concerned that IR scholars are missing a critical opportunity to offer insights into, and perhaps help shape, the emerging international politics of climate engineering. To that end, the primary goal of this paper is to call the attention of the IR community to these developments. Thus, we offer here an overview of the existing literature on the international politics of climate engineering and a preliminary assessment of its strengths and lacunae. We trace several key themes in this corpus, including problem structure, the concern that climate engineering could undermine emissions cuts, the potentially “slippery slope” of research and development, unilateral implementation, interstate conflict, militarization, rising tensions between industrialized and developing countries, and governance challenges and opportunities. The international politics of climate engineering is then considered through the lenses of the leading IR theories (Realism, Institutionalism, Liberalism, and Constructivism), exploring both what they have contributed and possible lines of future inquiry. Disciplinary IR scholars should have much to say on a number of topics related to climate engineering, including its power and transformational potentials, the possibility of counter-climate engineering, issues of institutional design, international law, and emergent practices. We believe that it is incumbent on the IR community, whose defining focus is international relations, to turn its attention to these unprecedented technologies and to the full scope of possible ramifications they might have for the international system.