This page describes the vision and the design for a science-based voluntary carbon pricing mechanism that is Paris Agreement compliant and responds to the realtime carbon budget.
Ando Shah
UC Berkeley / Open Earth Foundation
John Chuang
UC Berkeley
Martin Wainstein
Open Earth Foundation
Certain integrated assessment models (IAMs), which have been developed for decades, produce the social cost of carbon by modeling the socio-economic characteristics of human society at large, as well as geophysical characteristics of Earth’s climate system. However, they do not take into account the realtime state of the earth’s climactic system, but instead rely on modeled versions of those states. Moreover, they are not goal-driven, i.e. they do not allow us to set a price based on a societal target, such as the Paris Agreement (PA).
The goal of this project is to produce a mechanism of carbon pricing that is consistent with the PA, without violating the internal consistency of such IAMs or tampering with them, specifically to keep warming on the planet to less than 1.5C/2C. We do this by acquiring the realtime trend value of the concentration of carbon dioxide in the atmosphere, and deriving the remaining carbon budget as defined by the latest IPCC report. This carbon budget acts as the progress made towards the Paris Agreement - the smaller the budget, the closer we are to blowing that goal. This is not meant to be a hard constraint in the sense that it can be swapped out; as other agreements are negotiated, those can be chosen as the goal.
We have developed a hypothesis and a system architecture for users to choose a carbon price that is reactive to the state of the climate w.r.t the Paris Goal. To do so, we allow users to choose between peer-reviewed and validated methods to generate the social cost of carbon. This is essentially a variable that determines the damage done to human society (or subset, like a nation state) caused by the emission of one ton of $CO_2e$. We modulate this damage estimate according to the remaining carbon budget to generate a voluntary carbon tax outcome. Users will have full control of the parameters within the entire pipeline, through the API, for both web2 and web3 applications.
This product can be thought of as science-based pledge mechanism that quantifies the price that an organization is willing to pay for their emissions, and one that will continue to adhere to the Paris Agreement, i.e. it is dynamic.
The SCC module, produces a number, called the Social Cost of Carbon (SCC) which quantifies the damage a single ton of carbon dioxide equivalent causes to society if emitted today. Hence this module is known as the Damages Module.
Our goal is to modulate this value according to the progress made towards the PA, identified by the remaining carbon budget (RCB). The more CO2 humans emit, the more global warming there will be, and this will reduce the amount of available CO2 that can be emitted, before the PA agreement becomes untenable. Understanding how much RCB is left is not a straightforward exercise, as explained by this Carbon Brief article, and shown here:
Schematic showing how the remaining carbon budget can be estimated from various independent quantities, including the historical human-induced warming, the zero emission commitment, the contribution of future non-CO2 warming, the transient climate response to cumulative emissions of carbon (TCRE), and further correcting for unrepresented Earth system feedbacks. Source: Rogelj et al. (2019)
We derive the RCB by measuring the average CO2 concentration in the atmosphere in an ongoing basis, or in realtime through a Carbon Dioxide Oracle, and convert it to the remaining budget, as described by the latest IPCC report, the AR6 (conversion details here). Conceptually, the RCB acts as a progress indicator towards the goals of the PA.
The Inverse Bonding Curve module applies a multiplier to the damage value, modulated by the RCB → the lower the RCB, the higher the multiplier (hence the naming ‘inverse’). We refer to this as the impact multiplier, describing the impact the user or organization will have.