[Paris, France] New language currently being discussed at COP 21 would call for cooperation on transferable mitigation outcomes between negotiating states. The text supported by the European Union and Brazil would allow for trading of emissions reductions and leaves the door open offsets into the market. According to the mechanism drafted, countries would put in place an overall emissions a cap and continue to push ambition towards stronger goals over time.

Emission trading schemes (ETS) has long been a preferred model for the EU as well as Brazil. The European Union has been operating under their own emissions trading scheme since 2005 and are looking to find ways to connect it with new markets. Brazil on the other hand is looking to take advantage of their vast forest reserves and finding ways to monetize carbon sequestration to fund renewable energy development.

Government leaders and businesses across the globe have shown unwavering support for carbon pricing schemes. The World Bank has been one of the key instigators in the new trend towards carbon pricing. Elon Musk, world renowned owner of Tesla Motors Inc, SolarCity Corp, and SpaceX during a lecture at Sorbonne University endorsed the proposal: “If countries agree to a carbon tax and it’s real and it’s not super watered-down and weak, we could see a transition [to clean energy] that has a 15- to 20-year time frame as opposed to a 40- or 50-year time frame.”

Why are businesses lining up in support of a carbon fee? “Business has recognized that really putting a price on carbon is really a necessity in order to do the strategic planning that they need to undertake­ ­to make decisions about the kind of projects that they’re going to invest in.” Says Richard Eidlin Co-founder of the American Sustainable Business Council, “…So the carbon price, whether it’s a tax or emissions trading system gives clear guidance to companies.”

In the United States, businesses have begun to band together in support for local and national carbon pricing efforts. States including Oregon, Washington, Vermont, New York, Rhode Island, and Massachusetts have carbon pricing proposals. At the national level Senator Sheldon Whitehouse (D – RI) has proposed a US economy-wide carbon fee.

“Revenue neutral carbon pricing isn’t about growing the size of government. Nor does it involve direct regulation,” said the Senator when reached for comment, “the idea is so ‘market-based,’ so respectful of individual choice, it’s won the support of Greg Mankiw, chair of the Council of Economic Advisers under President George W. Bush and advisor to Mitt Romney during his 2012 presidential campaign.” Senator Barrett is the sponsor of a carbon pricing proposal in Massachusetts. The proposal has seen wide business support from important sectors and industries, including the financial sector, technology services, and construction.

To our north the four most populous Canadian provinces by 2017 will all have some form of a carbon pricing scheme. British Columbia has had one in place since 2008 that has had astounding results, Quebec in 2014 oped into the California cap and trade program. Canada’s most populous province, Ontario, announced this year that they are starting their own cap and trade program. And even Alberta, home to vast amounts of tar sand oil, just announced its own economy-wide revenue neutral price on carbon.

But critics of carbon pricing have concerns over its practicality. For one, calculating an exact price for emissions is complicated. It requires complex environmental and economic models that need to be constantly updated to reflect new information. The countries and businesses use a wide array of estimates: Sweden put it at $168/ton, the US government estimate is $38/ton, and Exxon-Mobil uses $60/ton.

This is why economists suggest a more general approach. Models can assess how a particular price can affect global emissions. Therefore the strategy is then to identify a temperature target and use the price that would reach that goal. But the only way this can be done is if world leaders come together and decide that they want carbon pricing on the table.

Carbon pricing makes sense, it is a simple mechanism that both businesses and consumers can understand. We are still going to need investment and commitments, technology transfer and a global dialogue to reach our goals. But If we as a global community are going to keep global temperature rise below 2oC then we need drastic action. A carbon price is not projected to get us all the way there, but it is the single best step we can take towards a climate change free future.

Read more at our post on Triple Pundit and The Hill!