Designing a Climate Policy: A Carbon Tax Approach with Adaptation Funds

Abstract

This paper suggests a climate policy that integrates adaptation funds into a harmonized carbon tax approach. In the proposed approach, the world will set a carbon tax assuming that vulnerable sectors will adapt to future changes at its full capacity. At the same time, the world will support climate adaptation programs at a regional level. A mitigation policy will be set at the global level while adaptation measures will be taken at a local or regional level. The carbon revenue generated from a mitigation program will be used to support adaptation aid programs in developing countries. This augmented carbon tax approach has the capacity to deal with climate inequities while it creates additional incentives for developing countries to participate in a global mitigation effort.