It’s crunch time for our climate future.
We are living through a worsening storm of hard impacts, and all of the ways forward are rocky. We are more than 30 years on from the historic global agreement to prevent dangerous human-caused climate change, and global emissions continue to rise. We know that global heating of 1.5ºC will bring ongoing hardship to every region of our planet, and that some critical structural elements of the stable climate will be lost, not soon to return. We need rapid policy action and cooperation to stave off disaster.
The Climate Value Exchange is founded on the recognition that Article 6.8 of the Paris Agreement outlines high standards for global cooperation to stave off climate breakdown.
- Article 6.8 is an invitation by 196 nations to all 196 nations to form bilateral and multilateral climate cooperation agreements that accelerate overall decarbonization, invest in adaptation, build resilience, and advance sustainable development.
- It calls for investment in nature, inclusion of the private sector in accelerated climate action strategies, and efforts to eradicate poverty.
- It effectively creates space in international law for integrating climate goals, vulnerability and resilience, into every area of intergovernmental work, including trade, development, security, and finance.
Article 6.8 also invites cooperation around pollution pricing of the non-market varieties, meaning not through emissions trading. This is important, because emissions trading can shift carbon accounting from one country to another, whereas non-market approaches are about cooperation to drive down emissions and build climate resilience in each of the participating countries.
How pollution pricing fits
Direct prices on pollution—sometimes referred to as carbon taxes or carbon fees—are needed to send a clear and undeniable price signal to businesses that profit from generating climate pollution, and to their investors. Revenues can be used to drive the transition to low-emissions energy and industry, and to provide direct economic support to households and businesses that do not profit from pollution but have no choice but to use the systems that dominate their economies.
Border adjustments are a needed extension of pollution pricing policies. If one nation or group of nations establishes a price on pollution, other nations might be tempted to steal industrial activity and investment away, by undercutting that price signal. To avoid this race-to-the-bottom, and to defend their ability to legislate for the common good, the pricing jurisdiction can enact an adjustment on goods produced in jurisdictions without adequate pollution prices. This is not a protectionist tariff, but a fair play incentive.
Carbon-related border adjustment mechanisms (CBAMs) are intended to level the playing field, and to invite close cooperation on aligning policies and price levels, to achieve the best possible shared economic and climate future among negotiating partners. This is one high-value area of Article 6.8 activity, but CBAMs invite negotiation and alignment across the whole economy of climate-related policy, innovation, and investment.
Since 2019, when ocean health and food systems began to get more detailed discussion, and finance ministers joined the annual UN Climate Change negotiations for the first time, nationally determined climate plans have begun to shift toward being something more like economy-wide future-building strategies. Investors large and small, across the public and private sectors, are looking for these new opportunities, setting up new dedicated funds and blended capital pools, and brainstorming what new business models can allow them to reach the vast array of small-scale actors, while reaching scale and generating reliable returns.
Crunch time for the climate means nations need to put prices on pollution.
Why we like climate income
At CCI, we like climate income as a way to get the best outcome for the climate, for people, and for whole economies. The core elements are:
- A fee on carbon pollution—preferably assessed at the mine, well, or port of entry, and steadily rising, as the economy adjusts;
- A rebate to households—the climate income, which shields consumers and local businesses against fossil fuel producers’ attempts to pass the cost off to them;
- A border adjustment—allowing pricing countries to negotiate the best possible terms with all trading partners.
The steadily rising fee means pressure on polluters to change course will intensify, and they will see that intensifying signal from the start. This allows more competitive and innovative enterprises to race ahead in the greening of their business operations and future investments. The rebate to households ensures against regressive impact on the majority of households that are not at the top of the income ladder. Together, the rising fee and the rising rebate incentivize the greening of small and medium-sized enterprises, by creating an expanding pool of local spending, which translates into even greater net income to businesses that avoid pollution costs.
Canada’s carbon rebate is a great example of climate income in action. Households in participating provinces receive direct payments, while polluters pay. This creates a greening incentive, to allow local economies to thrive and evolve, while polluting energy and industrial systems see cost-pressure to innovate. Rural communities and specific vulnerable stakeholders can get a supplement to their standard rebate, to ensure costs are not unfairly passed to the vulnerable.
The PARIS Principles
Ahead of the 2014 global climate negotiations in Lima, where the Paris Agreement was being drafted, Citizens’ Climate International Program (now CCI) volunteers and team members worked to capture these virtues in a way that could apply to any pollution pricing policy, while fostering constructive cooperation between nations. That effort produced the PARIS Principles:
- Price pollution with a defined, steadily rising price on climate-disrupting emissions, preferably at the source.
- Add momentum. Enhance incomes; build economic value at the human scale.
- Reduce emissions effectively and accountably, by keeping the administrative structure simple and transparent.
- Internalize inefficiencies—cost and harm linked to polluting business models—incrementally, with escalating certainty and with no leakage.
- Spread by aligning price signals and supporting policies, harmonizing across borders, so pricing can be enacted country by country.
The PARIS Principles aimed to produce a context for negotiating fair, equitable, and economy-building carbon pricing policies, while also laying a foundation for broader multilateral climate cooperation. Now, in the context of Article 6.8 multilateral cooperative climate initiatives—and in this crunch-time moment, where we need pollution prices to rise and clean investment to be unlocked and expanded—we hope nations will consider climate income, and groups of nations will honor the PARIS Principles. Doing so would decouple economic gains from pollution and support shared climate-resilient development.
Additional resources
- The PARIS Principles
- How to mainstream climate action everywhere
- CCI briefing note on non-market approaches
- CCI note on people-centered carbon pricing
- Carbon Pricing Leadership Coalition
- Article 6.8 Reading List
Related reading
Climate impacts cross borders.
Climate Value Exchange 