Carbon pricing and planetary boundaries

Human activities are threatening to push the Earth system beyond its planetary boundaries, risking catastrophic and irreversible global environmental change. Action is urgently needed, yet well-intentioned policies designed to reduce pressure on a single boundary can lead, through economic linkages, to aggravation of other pressures. In particular, the potential policy spillovers from an increase in the global carbon price onto other critical Earth system processes has received little attention to date. To this end, we explore the global environmental effects of pricing carbon, beyond its effect on carbon emissions. We find that the case for carbon pricing globally becomes even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures. It does however exacerbate certain planetary pressures, largely by stimulating additional biofuel production. When carbon pricing is allied with a biofuel policy, however, it can alleviate all planetary pressures.

Gustav Engström, Johan Gars, Chandra Krishnamurthy, Daniel Spiro, Raphael Calel, Therese Lindahl, Badri Narayanan