Officially launched during a SPRU seminar titled “Theorising an instrument for a ‘Low Carbon Bretton Woods’”, held on Friday 2nd of May, an innovative idea focusing on climate change-related international policies and carbon markets has recently raised interest and debate both within and outside the School of Business Management and Economics.

Core of the idea is the development of an instrument, and of its reference functioning system, capable of addressing most of the main obstacles and lock-ins that are still impeding an international agreement in the field of climate change negotiations. Resulting from more than seven years of research, the idea merges elements form already functioning carbon trading schemes with a limited set of modifications proposed by academics and policy-makers in an attempt to define the structure of a hypothetical global carbon market.

Apart from the aim of nudging international climate change negotiations towards an agreement, a set of additional objectives was introduced during the seminar. Looking beyond the domains usually related to climate change such as sustainability and energy, these objectives encompass areas such as finance, economics and policy, which ultimately culminate in radical innovation pathways for monetary systems.

Subsequently, the seminar focused on defining the scope of the hypothetical instrument, the nature of its reference system (the hypothetical carbon market) and the proposition of a set of general assumptions: 1) the definition of a global cap of carbon emissions; 2) the establishment of a solid, long-term reduction target concerning greenhouse gas (GHGs) emissions coupled with steady shorter-term commitments; 3) the distribution of the target duties between all the participating actors (or parties); 4) the establishment of a system, based on both international regulatory frameworks and free market elements, to guarantee and monitor the compliance with the agreed duties.

The seminar offered hypotheses on each assumption’s development. Special attention was paid to the fourth point, where the establishment of an international institution in charge of monitoring and verifying both emissions reductions (through the issuance of ad-hoc certificates) and the parties’ compliance with their emission duties was theorised. With reference to the same point, an international market for exchanging emissions reduction certificates (defined as ‘global emissions reductions’ – GERs) was proposed, based on a structure similar to carbon offset mechanisms combined with cap-and-trade elements. Special attention was paid to the experience of the Kyoto Protocol’s clean development mechanism (CDM), which was identified as possible reference structure for the proposed instrument’s (GERs) functioning.

Assuming the adoption of equal rights and duties (with the latter to be distributed on the basis of ‘common but individual responsibilities’) by all involved parties, the debate moved towards theorising opportunities for the proposed instrument and its reference system to contribute overcoming the limits posed by the historical dialectic of climate change negotiations.

While stressing that the proposal still requires technical research efforts and, more than all, an extensive policy support, a set of expected outcomes deriving from the same proposal development were introduced: 1) the institution of a single mechanism for global emissions reduction management shall lead to the merging of currently existing regional and local carbon markets, thereby rationalising the overall mitigation system; 2) the extension of rights and duties concerning emissions reductions to any actor of the involved parties shall help overcoming some of the lock-ins, such as the additionality issue, which currently limit a radical up-scaling of actions necessary to mitigate climate change; 3) the rationalising of the mitigation system while extending duties and rights to any involved actor shall substantially scale-up the magnitude of emissions reduction activities worldwide.

Once the analysis of the instrument and the scope, functioning and objectives of the reference system had been clarified, the seminar then moved towards theorising some of the possible effects related to its application. An organisation by domain, or sector, was chosen to represent the possible effects, with the domains including climate change, economy, energy, sustainability, finance and monetary systems.

Despite being limited by the theoretical status of the proposal and by the nature of some of the identified barriers (heavily depending on policy actions and actors choices that cannot be interpreted ex-ante), the presentation offered a portfolio of hypotheses, ideas and considerations regarding possible inherent opportunities: leverage of emissions reduction investments; anti-rebound effect in a macroeconomic perspective; positive direct and indirect effects for environmental and social sustainability; stimulus for financial systems to adopt and develop new instruments linked to the proposal.

Space was finally given to the debate on the opportunity for the instrument to promote the institution of a representative international currency. By establishing a cap to (anthropogenic) GHGs emissions, the same emissions would be converted into a finite commodity. Combined with the institution of a single instrument (the GERs) representing the ‘currency’ for commodity acquisition, suggestions for a hypothetical link of the same within the current monetary systems were raised and debated.

While most of the elements introduced during the seminar require further research and clearer definition, the seminar itself represented the first opportunity to stimulate a wider debate about an innovation that, at least in theory, may represent a genuine opportunity to advance international climate change negotiations.

Special thanks to Dr Colin Nolden (SPRU) for the relevant editing contribution.

By Dr Michele Stua, SEG, SPRU, University of Sussex