ABSTRACT
This chapter presents a design method for climate policy instrumentation capable of remaining well below a 2-degree Celsius temperature increase, preferably even below an increase of 1.5 degrees which is also the climate stabilization goal as stated in the UNFCC Paris Agreement of 2015. The first analytical layer in the design process is that of political philosophy, following the two main directions discussed in the previous chapter: going toward effective centralized planning or toward incentives and options creation for mainly decentralized action. The second layer involves major political, cultural and economic developments, such as increasing economic inequality, trends toward monopolization, the growing political power of the extremely wealthy around the world and the increasing role of IT and AI in the globalized knowledge domain. The third layer involves the specification of instrument types, ordered in relation to primary governance choice, and the delimitation of climate policy instruments relative to other policy domains. Finally, any instrumentation design must be effective and efficient, operationalized around the concept of simplicity, involving sparseness, completeness, non-overlap and equality. Planning & Control instrumentation starts with regulating main fossil CO2 emitters as flexibly and dynamically as possible, with public–private partnerships for innovation in zero-emission technologies and infrastructure. Institutionalism, conversely, starts with repairing primary, now faulty, market mechanisms: usual liability procedures cannot cover global warming emissions, and intermittent renewable energy does not fit in current electricity markets. An emission tax is the public version of private liability, while large-scale, real-time, equal-for-all electricity markets can integrate intermittent renewables in the publicly owned grid. Both instrumentations are mutually exclusive.
