International Institute for Industrial Environmental Economics (IIIEE)
Lund University

What can be done to resolve the climate crisis?

Abstract: The Global Carbon Reward policy has been in development for nine years. The first comprehensive description of the policy is now available in a working paper. Why has it taken so long to develop this policy? The challenge is that the policy was developed in combination with a new conceptual model and a revised theory for the market failure in carbon. In this presentation, Delton Chen will introduce the revised theory, which is framed by a “carbon pricing matrix”, and a new type of externality that does not appear in economics textbooks. The new externality is called a “systemic externality”, and it refers to the societal lock-in that is preventing or slowing the application of conventional policies (e.g. carbon taxes) for reducing greenhouse gas (GHG) emissions and correcting the market failure. The new theory also states that social costs and systemic risks need to be priced separately, with a “carrot and stick” approach. He will offer a resolution to the climate crisis based on the introduction of a “parallel economy” and a “carbon currency” that are designed to (a) remove GHGs from the atmosphere and (b) strategically reduce GHG emissions.