• DOI:10.1080/20430795.2017.1314814
• Corpus ID: 157277979

Climate mitigation policy as a system solution: addressing the risk cost of carbon

@article{Chen2017ClimateMP,
  title={Climate mitigation policy as a system solution: addressing the risk cost of carbon},
  author={Delton B. Chen and J L M van der Beek and John Cloud},
  journal={Journal of Sustainable Finance \& Investment},
  year={2017},
  volume={7},
  pages={233 - 274},
  url={https://api.semanticscholar.org/CorpusID:157277979}
}

• Delton B. Chen, J. V. D. van der Beek, John Cloud
• Published 4 May 2017
• Environmental Science, Economics
• Journal of Sustainable Finance & Investment

ABSTRACT Global 4C is a new international climate mitigation policy that adopts a risk management framework. Global 4C offers a financial reward for mitigation and aims to internalise a Risk Cost of Carbon (RCC) into the economy. Carbon taxes (i.e. carbon prices) are essential for internalising the Social Cost of Carbon (SCC), however a SCC-RCC duality is inferred with an epistemological method and is supported with a new hypothesis, called the Holistic Market Hypothesis. Based on the inferred… 

ABSTRACT Global 4C is a new international climate mitigation policy that adopts a risk management framework. Global 4C offers a financial reward for mitigation and aims to internalise a Risk Cost of Carbon (RCC) into the economy. Carbon taxes (i.e. carbon prices) are essential for internalising the Social Cost of Carbon (SCC), however a SCC-RCC duality is inferred with an epistemological method and is supported with a new hypothesis, called the Holistic Market Hypothesis. Based on the inferred SCC-RCC duality, a system of complementary market pricing is proposed as an effective response to emerging climate systemic risk and fat-tailed probability distributions for the Earth's climate sensitivity. The recommended policy instrument is a currency, called Complementary Currencies for Climate Change (4C). 4C should be priced in foreign exchange currency markets (Forex) to mirror the RCC and to incentivise a spectrum of mitigation services, including clean renewable energy and carbon sequestration. A public broadcast message for climate systemic risk should be made each year, in the form of a ‘100-year advance 4C price alert’, which is an assurance of reward prices for carbon mitigation (i.e. the 4C exchange rate) under a Carbon Exchange Standard (CES). The CES is a macro-prudential protocol for central banks to provide collective insurability against climate catastrophe and incentives for socio-ecological co-benefits.