How a carbon central bank can turn Europe into a CO2 “eater” — Potsdam Institute for Climate Impact Researchhttps://www.pik-potsdam.de/en/news/latest-news/how-a-carbon-central-bank-can-turn-europe-into-a-co2-201ceater201dEdenhofer proposes so-called clean-up certificates as a core instrument. They give the right to emit one tonne of CO2 in combination with the obligation to take back one tonne of CO2 at a specific future date. So far, the EU Emissions Trading System (ETS) only offers simple emission rights, which are reduced year by year and, according to current legislation, will fall to zero in 2039. Adding clean-up certificates makes the climate transition cheaper and more flexible: CO2 emissions would not have to be avoided at all costs, even as permits become scarcer, if it is more cost-effective to emit now and remove later. The price of these certificates would reflect expected future cost reductions in carbon removal technologies. The financial risk of the climate transition would then be borne not by the state, but by the economy, which is, after all, obliged to make the removals.
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To ensure that the idea does not fail due to physical inadequacies or corporate tricks, Edenhofer argues that it should be implemented by a strong and credible institution, and makes the case for a future “European Carbon Central Bank”. By issuing the certificates, it could oversee the quantity control of net emissions, keeping this matter out of day-to-day party politics – just as the European Central Bank does with interest rates. This important new EU authority could also correctly reflect the economic value of non-permanent removals, such as afforestation or storing CO2 in building materials, in the clean-up certificates. And to ensure that companies do not undermine their carbon removal obligation through strategic bankruptcy, they would have to deposit financial collateral with the Carbon Central Bank.