🏦Do we need a European Carbon Central Bank?🏦

A lot of people seem to be discussing how and when to integrate carbon dioxide removal (#CDR) into compliance markets. In this context, the idea of a European Carbon Central Bank (ECCB) has recently sparked an intriguing academic debate that should offer interesting insights. An ECCB could act as an intermediary agency, addressing long-term commitment problems associated with carbon pricing and liability management.

What are the benefits of a European Carbon Central Bank?

💸The proposed system aims to stabilize carbon prices while maintaining the net-emissions path, steadying the market.

💡The system could create a market for carbon dioxide removal (#CDR) options that store carbon permanently but are not yet cost-competitive. This would promote innovation and investment in such technologies.

💼Modelled after independent institutions like central banks, the proposed system offers flexibility in responding to future developments and is shielded from political influence.The system includes measures to ensure the permanence of removals by invalidating credits if necessary, maintaining the integrity of the carbon removal program and handling liabilities.

What are the potential concerns with a European Carbon Central Bank?

🎤Concerns have been raised about the extent of decision-making authority given to the proposed ECCB.

🔎An ECCB might treat all removal credits equally, not differentiating between removals with robust monitoring systems from those with weaker ones.

🌳Ensuring the constant renewal of non-permanent removals would be challenging, especially over long timescales. Climate change impacts on ecosystem capacities make this task increasingly difficult and potentially more costly, raising concerns about the feasibility and manageability of the system.

A European Carbon Central Bank or other intermediary agencies have emerged as a potential solution to address the challenges associated with carbon removal and pricing. As the discussion progresses, it is essential to carefully evaluate its potential benefits and limitations. Stakeholders should engage in comprehensive deliberation to strike a balance that effectively addresses the challenges of carbon removal, ensures market stability, and contributes to the long-term #sustainability of our climate goals.

If you enjoyed this post, you might be interested in last week's post where I highlighted four options for integrating carbon dioxide removal (#CDR) technologies into the Emissions Trading System (check out the post here).

What do you think? Could a carbon central bank be feasible in Europe?