TY - JOUR
T1 - Escaping the climate policy uncertainty trap: options contracts for REDD+
AU - Golub, Alexander
AU - Fuss, Sabine
AU - Lubowski, Ruben
AU - Hiller, Jake
AU - Khabarov, Nikolay
AU - Koch, Nicolas
AU - Krasovskii, Andrey
AU - Kraxner, Florian
AU - Laing, Timothy
AU - Obersteiner, Michael
AU - Palmer, Charles
AU - Piris-Cabezas, Pedro
AU - Reuter, Wolf Heinrich
AU - Szolgayova, Jana
AU - Taschini, Luca
AU - Wehkamp, Johanna
N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in Climate Policy on 02/03/2018, available online: http://www.tandfonline.com/10.1080/14693062.2017.1422478
PY - 2018/3/2
Y1 - 2018/3/2
N2 - Climate policy uncertainty significantly hinders investments in low-carbon technologies, and the global community is behind schedule to curb carbon emissions. Strong actions will be necessary to limit the increase in global temperatures, and continued delays create risks of escalating climate change damages and future policy costs. These risks are system-wide, long-term and large-scale and thus hard to diversify across firms. Because of its unique scale, cost structure and near-term availability, Reducing Emissions from Deforestation and forest Degradation in developing countries (REDD +) has significant potential to help manage climate policy risks and facilitate the transition to lower greenhouse gas emissions. ‘Call’ options contracts in the form of the right but not the obligation to buy high-quality emissions reduction credits from jurisdictional REDD+ programmes at a predetermined price per ton of CO2 could help unlock this potential despite the current lack of carbon markets that accept REDD+ for compliance. This approach could provide a globally important costcontainment mechanism and insurance for firms against higher future carbon prices, while channelling finance to avoid deforestation until policy uncertainties decline and carbon markets scale up.
AB - Climate policy uncertainty significantly hinders investments in low-carbon technologies, and the global community is behind schedule to curb carbon emissions. Strong actions will be necessary to limit the increase in global temperatures, and continued delays create risks of escalating climate change damages and future policy costs. These risks are system-wide, long-term and large-scale and thus hard to diversify across firms. Because of its unique scale, cost structure and near-term availability, Reducing Emissions from Deforestation and forest Degradation in developing countries (REDD +) has significant potential to help manage climate policy risks and facilitate the transition to lower greenhouse gas emissions. ‘Call’ options contracts in the form of the right but not the obligation to buy high-quality emissions reduction credits from jurisdictional REDD+ programmes at a predetermined price per ton of CO2 could help unlock this potential despite the current lack of carbon markets that accept REDD+ for compliance. This approach could provide a globally important costcontainment mechanism and insurance for firms against higher future carbon prices, while channelling finance to avoid deforestation until policy uncertainties decline and carbon markets scale up.
U2 - 10.1080/14693062.2017.1422478
DO - 10.1080/14693062.2017.1422478
M3 - Article
SN - 1469-3062
VL - 18
SP - 1227
EP - 1234
JO - Climate Policy
JF - Climate Policy
IS - 10
ER -