Piloting a Price on Carbon: How World Universities Can Join in Taking the Lead

India and the world need a framework for designing and implementing internal carbon pricing systems. Based on our experience, however, there seems to be no one size fits all model. Different organizations have different structures and priorities, and therefore require different pricing instruments.
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We were privileged to be in India last month representing Yale University to help start a conversation on how corporations and organizations can work to meet the country's new emissions reduction commitment by putting a price on carbon.

After participating in the World Bank's Corporate Carbon Pricing Leadership Workshop in Mumbai and the India Climate and Business Conclave in New Delhi, we have high hopes for India's private sector to pave the nation's way to a low-carbon future.

As recent graduates of Yale, we have worked with our alma mater to develop the first university-based carbon pricing program in the world. It was an honor to help Indian companies put together a roadmap for operationalizing carbon pricing. As Yale President Peter Salovey has observed, "Universities have a critical role to play in offering leadership, teaching, and research expertise to help develop effective climate change solutions."

Yale this year became the first university member of the Carbon Pricing Leadership Coalition, a private-public partnership among the World Bank, International Monetary Fund, governments, nonprofits, and private sector companies to strengthen carbon pricing policies through the development of a network for sharing best practices. We believe India's private and public sectors have much to gain from and add to the coalition's efforts, and India's universities can help play an important supporting role. Moreover, this collaboration across sectors can be a model for other nations to emulate.

In Paris in December, India and 188 other countries agreed to carry out a climate action plan and to play their part in a collective effort to combat global climate change. India's own pledge commits to reducing the national emissions intensity per unit of GDP by 33 to 35 percent below a 2005 baseline by 2030. Two more important aspects of the plan include increasing the country's supply of non-fossil-based power from 30 to 40 percent and sequestering an additional 2.5 to 3 billion tons of carbon dioxide by 2030.

Putting a price on carbon can help encourage the investments in green energy and energy efficiency needed to meet these ambitious goals.

To mitigate the worst effects of a warming planet, economists and scientists agree that carbon pricing is an important, if not necessary policy tool for decarbonization. Pricing the externality at the point of pollution causes markets to shift to less carbon-intensive activities and services, gradually decoupling emissions from economic growth.

So how can India--from its private sector office parks and factories to its university campuses--help the world bend the carbon curve? As Mahatma Gandhi said: "Be the change you want to see in the world."

Learning by doing is critical to success in our carbon pricing experiment at Yale. What works in theory does not necessarily work in practice. And what does work takes not only time and resources, but also the willingness to learn and the flexibility to change.

India and the world need a framework for designing and implementing internal carbon pricing systems. Based on our experience at Yale, however, there seems to be no one size fits all model. Different organizations have different structures and priorities, and therefore require different pricing instruments.

The world needs more pilot projects, an exchange of best practices, and coalition building. This is where India's private sector and universities are poised not only to help, but to lead.

Our experience demonstrates that universities can begin putting a price on carbon and move to scale after gathering insights from pilot experiments. In August 2014, Yale President Peter Salovey formed a university task force to investigate whether and how Yale could use carbon pricing to hedge risk, reduce emissions, and cut costs while engaging our community in an effort to lead by example and through research. After a year of assessment and planning under the guidance of Yale professor and climate economist William Nordhaus--with input from students, faculty, and staff--we are now conducting an experiment in twenty of our 350 buildings.

Another strategy is to learn constantly and grow gradually. The Yale pilot is far from perfect and much works remains to be done. But we are acquiring invaluable insights into what carbon pricing models prove motivating, actionable, effective, fair, feasible, and replicable. By testing multiple pricing schemes, we hope to inspire and inform similar efforts beyond Yale. In Mumbai and New Delhi, Indian companies appear keen on applying the same drivers of success as they consider incorporating carbon pricing as a core part of their business strategy.

Finally, focus on culture shift--not culture shock. Looking at supply and demand curves would seem to suggest that pricing the externality that is greenhouse gas emissions would shock the economic system into abatement overnight. But history tells us that economic policies take time to take hold and to achieve the desired effect.

It would be wonderful for Indian and other global universities to join in this effort. Through our experience we have found that campuses can serve as ideal living labs for testing theory and policy in practice. We are eager not only to share our best practices and help others get started, but to learn from their findings. Let's make this the start of another conversation--one that can turn into a global collaboration in higher education.

As students and researchers at heart, we believe that experimentation and education are essential to solving global climate change, which is the most urgent challenge of our generation. While we cannot buy more time, and while carbon pricing may only be part of the solution, we can play a part in this call to action by working together to study and test how to design and implement effective pricing schemes for all.

So what do we really need? A more unified, concerted, and global effort to find out what it takes to put a price on carbon. If our meetings in India are a sign of what is to come, we are hopeful.

Now, let's start piloting, and leading--at Yale, in India, and for the world.

You can contact the authors at carbon@yale.edu. To learn more about Yale University's Carbon Charge Project, visithttp://carbon.yale.edu. For more information about the Carbon Pricing Leadership Coalition, see http://www.carbonpricingleadership.org/.

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