(Private)-Retroactive Carbon Pricing [(P)ReCaP]: A Market-based Approach for Climate Finance and Risk Assessment

Yoshua Bengio, Prateek Gupta, Dylan Radovic, Maarten Scholl, Andrew Williams, Christian Schroeder de Witt, Tianyu Zhang, Yang Zhang
May, 2022
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Abstract

Insufficient Social Cost of Carbon (SCC) estimation methods and short-term decision-making horizons have hindered the ability of carbon emitters to properly correct for the negative externalities of climate change, as well as the capacity of nations to balance economic and climate policy. To overcome these limitations, we introduce Retrospective Social Cost of Carbon Updating (ReSCCU), a novel mechanism that corrects for these limitations as empirically measured evidence is collected. To implement ReSCCU in the context of carbon taxation, we propose Retroactive Carbon Pricing (ReCaP), a market mechanism in which polluters offload the payment of ReSCCU adjustments to insurers. To alleviate systematic risks and minimize government involvement, we introduce the Private ReCaP (PReCaP) prediction market, which could see real-world implementation based on the engagement of a few high net-worth individuals or independent institutions.

Type
Preprint
Publication
In arXiv.org
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Paper

Economics Market Mechanism
Tianyu Zhang
Tianyu Zhang
Ph.D. Student in Machine Learning

My research interests include Algorithmic Game Theory, Agent-based Model Simulator, AI for Climate Change, Multi-agent Reinforcement Learning, Self-supervised Learning, Domain Adaptation. I am still exploring and learning slowly.