PRESS RELEASE (embargoed until 18/05/2020, 10:00 CEST)
Net-zero emission pricing strategies
Advancing the International Climate Dividend Alliance
Zurich, 18 May 2020 — The Cleantech21 Foundation and Citizens’ Climate Education proudly announce the further development of the International Climate Dividend Alliance (ICDA), enabled by the support of the Swiss Federal Office for the Environment. ICDA will act as an international, non-profit organisation advocating the incentive fee/redistribution (‘Climate Dividend’) approach to emission pricing. The key advantages of Climate Dividend Frameworks (CDFs) are: Simplicity, political feasibility, pricing effectiveness, and the fact that they assure a just transition. CDFs can thus be seen as 1.5ºC-compatible emission pricing strategies.
Amid a steadily worsening climate crisis, the Paris Agreement must be rapidly implemented. As we enter a new decade in 2020, the steadily mounting cost-pressures make the urgency of developing net-zero compatible policy all but unavoidable. In fact, to secure future prosperity, net-zero compatible policies must rapidly be implemented across the globe. Most observers agree that the meaningful pricing of greenhouse gas (GHG) emissions must form part of literally every net-zero climate strategy, i.e. every Nationally Determined Contribution (NDC). As of the middle of the last decade, there has been lots of talk and ‘activities’ around ‘carbon pricing’. Tangible progress, however, has been rather modest and is clearly not compatible with the needed emission reduction pathways, i.e. remaining emission budgets for CO2 and CO2-equivalent (CO2e) global warming pollution.
There are many different approaches to emission pricing – with very different levels of complexity, speed of implementation, burden sharing and emission coverage. In the light of the current crisis and urgent need for action, these different policy characteristics require close attention. Commonly, ‘tax’ and ‘trade’ are differentiated, the former implying a fee charged on emissions and collected by government, the latter standing for the setting of a cap on emissions, auctioning emission rights, and facilitating a market for trading those rights.
This common differentiation falls short of many important practical aspects for implementing pricing policies. A ‘carbon tax’ may be collected at different points in the value chain – upstream, midstream, or downstream. Depending on the type of collection, administrative requirements, political feasibility, and speed of potential implementation may vary greatly. Even more importantly, uses of tax revenue may vary widely, which, in turn, has strong implications on political feasibility and burden sharing. ‘Carbon markets’, on the other hand, may be very different in their design, coverage, and effectiveness. Even the most advanced markets, such as the EU’s Emission Trading System (ETS), only cover half of all carbon emissions — which is of obvious concern, in light of the need for net-zero CO2e emissions targets. Furthermore, international linking and achieving tangible short-term results represent significant ETS challenges.
A Climate Dividend Framework (CDF) — also referred to as ‘carbon dividend’, ‘fee and dividend’, ‘tax and dividend’ or ‘climate action incentive rebates’ — is a novel policy approach to emission pricing. It is designed for administratively simple deployment and fast-paced, economy-wide climate action. In a CDF, a legislature or fiscal authority assesses a fee on all GHG emissions. Revenues are collected as far upstream as possible, to ensure maximum administrative simplicity and economic efficiency and the broadest possible coverage of emissions throughout the economy. Revenues are then distributed in equal amounts to all households, making CDFs budget neutral. Instead of shifting resources to government, Climate Dividends sustain and expand purchasing power in an economy (and can thus also be regarded as ‘business friendly’).
Like other emission pricing schemes, a CDF is a market signal policy that affects all market actors. Different from other emission pricing policies, a CDF avoids otherwise common political struggles over the use of revenues. Given that low-income households will experience a net financial gain (because high income households have much larger emission footprints, making Climate Dividends a progressive measure), a CDF also offers significant advantages with respect to just transition and thus the feasibility of rapid implementation. With modern, digital ID and wallet-based technologies, pay-outs to households can be made both efficiently and transparently.
CDFs have thus far not received the attention they deserve. For this reason, the Cleantech21 Foundation and Citizens’ Climate Education have joined forces to establish the International Climate Dividend Alliance (ICDA). Through convenings at international events, selected reports and policy summaries, as well as consulting and advocacy with business and political leaders, ICDA seeks to serve the following specific objectives:
- promote understanding, awareness of the advantages, and interest in the implementation of CDFs;
- deepen policy-makers’ learning regarding CDF design and deployment — from an economic, technical, and communications point of view;
- build a shared vision and global movement around the implementation of CDFs;
- evaluate legal and technical infrastructure options for CDFs;
- prepare and support CDF-related cross-border issues (such as border adjustments);
- ensure proposed CDFs are sound, effective in implementation and operation, as well as in line with the Paris Agreement and its implementation protocols (‘Rulebook’).
Today, the first Climate Dividend technical workshop will be hosted online, in partnership with the Carbon Pricing Leadership Coalition. ICDA is now actively seeking additional supporters from government and industry. Interested parties may contact Nick Beglinger or Joseph Robertson (details below).
“Climate Dividends can be considered as the closest thing to a ‘golden bullet’ climate policy. They are simple to be understood, fast to be implemented, and fair in terms of burden sharing. In the fight against the climate crisis, Climate Dividends deserve a lot more attention. Finally, their time has come” says Nick Beglinger, CEO of the Cleantech21 Foundation, co-initiator of ICDA.
“The objective of the Climate Dividend Alliance is to position CDFs as the strongest, most efficient emission pricing policy option for developed and developing countries. It supports their implementation through NDCs and thereby accelerates the transition to zero-emissions, while making sure the economically vulnerable are empowered to gain from the transition” says Joe Robertson, Global Strategy Director Citizens’ Climate Lobby and Citizens’ Climate Education, co-initiator of ICDA.
“FOEN supports ICDA as we believe the ‘Dividend Approach’ deserves more international attention. Since 2008, Switzerland applies this for all emissions from heating fuels, and our experience is clearly positive” states Franz Perrez, Ambassador for the environment, Head of international affairs division, Federal Office For The Environment (FOEN), Switzerland.
About the Cleantech21 Foundation
Cleantech21 Foundation (C21) is a Swiss not-for-profit foundation whose core mission is to contribute to addressing the climate crisis. C21’s approach is to develop project initiatives offering significant leverage through regulatory and/or technical innovation. C21 has an 11-year advocacy track record. The foundation has initiated Switzerland’s leading green business association and operated it for seven years. The association was spun out in 2016. Since then, C21 focuses its work on selected international initiatives.
Contact: Nick Beglinger, CEO, C21 — nick.beglinger(at)cleantech21.org
About Citizens’ Climate Education
Citizens’ Climate Education (CCE) is a US-based non-partisan non-profit organization that provides free, ongoing education and support for Citizens’ Climate Lobby volunteers (197,000, in 58 countries). CCE provides ongoing education and training in all relevant areas of political and social science, policy design, and macroeconomic education, to support citizens’ efforts to build political will among legislators and policy-makers for people-centered economy-building climate solutions. CCE is a founding strategic partner in the Carbon Pricing Leadership Coalition and supports more open, detailed, ongoing citizen engagement, macro-economic education, and financial innovation around climate dividend frameworks and legislative initiatives.
Contact: Joseph Robertson, Global Strategy Director, CCE — jr(at)citizensclimate.org