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Abstract
Given the urgency and the magnitude of emission cuts required to arrest the global
temperature rise at an acceptable level (like 2 degrees Celsius), it is imperative that
action to mitigate climate change is taken at the lowest cost. This can be done if a cost
effective set of policy tools with a focus on carbon pricing is applied as broadly as
possible across all emission sources. In view of the emerging consensus on the
temperature target like 2 degrees Celsius, it is imperative that climate scheme caps
global emissions rather than allowing governments to arbitrarily pledge their intended
cuts. Global emissions must be contained within the limit of carbon budget that achieves
temperature objectives. Emission allowances must be issued in accordance with such
limit and be sold to the global demand of emitters. Such sales of carbon budget give rise
to both the most accurate carbon pricing as well as new revenue that can be used for
much needed climate financing for developing countries. A new climate regime along
those lines would stop global warming at an acceptable level, provide a new large
climate funding that would integrate developing countries to a global low-carbon growth
and transformation and keep all economies thriving, whether they are developing,
emerging or developed. The post-2020 climate regime must be nimble and effective, not
unwieldy and least burdensome. It must also be durable and fully congruent to the
economic realities of the coming decades.