A Proposal to Create a Single Global Cap-and-Trade Scheme to Ensure a Ceiling on Gross CO2 Emissions below a Pre-set Allowable Carbon Budget

Naoki Matsuo 

It is time for faithful and trustworthy world leaders to lead in establishing a “Global Cap-and-Trade regulatory framework” to change our course promptly. This framework aims to establish an institutional mechanism that ensures steadily decreasing global emission limits. The Scheme regulates upstream entities that import or produce fossil fuels, with the initiation of countries that share the objective and choose to participate voluntarily, and guides us toward a global carbon-neutral economy. In addition, the Scheme can enable a major global paradigm shift not only for climate issue but also for financing SDGs, and addressing fossil fuel resource concerns, notably: (a) a global emissions cap trajectory setting based on the pre-agreed remaining gross carbon budget to be decided by the CMA of the Paris Agreement; (b) initiated by a highly conscious club of countries and building in incentives for other countries to participate; (c) a fully auctioning upstream-type regulatory scheme with a single market of international allowance as a new energy commodity [for supply-side of fossil fuels]; (d) a uniform—theoretically ideal—international carbon pricing scheme to realise the minimum cost (and no need for the border adjustment), as an external common factor, while it respects national sovereignty [for demand-side of energy]; (e) becoming an economic framework with no need for awareness of CO2 ceiling explicitly [for demand-side of energy]; (f) generation of a trillion-dollar auctioning proceeds stream—equivalent to an agreed amount of total financial transfer at the COP29—for financing SDGs and regressive mitigation for low-income people, and incentivising developing countries for participation; (g) together with a carbon crediting scheme enabling fossil fuel production without limitation by carbon capture and storage (CCS) [for supply-side of fossil fuels]; and (h) enhanced fossil fuels predictability for production investment [supply-side] and effective utilisation [demand-side] under clear rules with a price stabilisation effect. We look forward to the strong will of current world leaders for future generations.