“The basic principle of smart climate policy is simple,” say the two economists. “Those who emit CO2 have to pay. A price for CO2 creates the right innovation incentives and leads to a cheap and effective decrease in greenhouse-gas emissions. But even more important: a price target is suitable as a common commitment of the international community and can therefore help to break out of the climate negotiation deadlock. Even the best national climate policy is of little use without international cooperation. So this is not just about a little more or a little less economic efficiency. The question is whether the global community cooperates trustfully in regard to the probably greatest dilemma in human history – or whether it dissipates in a patchwork of self-centered measures and diplomatic activism, to finally fail because of itself.”
The “Green Climate Fund”, which collects money within the framework of international climate policy, could in this context be employed effectively. With its help, cooperation could be rewarded, and differences in mitigation costs could be taken into account, explains Edenhofer, who is also director of the Mercator Research Institute on Global Commons and Climate Change. The states could allocate the income from CO2 pricing to compensations “in the case of politically unwanted burdens”, tells the article. “Even without regard to the climate effects, it would be better to generate state revenues from an efficient CO2 pricing than through distortionary taxes on labour income.”
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