A carbon pricing coalition’s proposal from Harvard and MIT researchers, aimed at developing countries, could reduce global emissions seven times more than current policies while generating nearly $200 billion annually for climate action.
Researchers from Harvard and MIT have developed a carbon pricing coalition plan for countries to collaborate on carbon pricing, which could reduce global emissions more significantly than current policies while raising nearly $200 billion annually. The proposal comes as Brazil prepares to host the international climate summit COP30 in November.
The plan centers on countries agreeing to charge a minimum price for carbon pollution from heavy industries like steel, cement, aluminum, and fertilizer production. These four industries alone produce more than 20% of global carbon emissions.
Under the proposal, member countries would set a floor price for carbon emissions within their borders. They would also charge fees on imports from non-member countries to ensure fair competition. The researchers say this approach would encourage more countries to join while protecting businesses that pay carbon prices from being undercut by competitors in countries without such rules.
The modeling shows dramatic results. Countries in the carbon pricing coalition would cut emissions roughly seven times more than they’re currently on track to do. This reduction equals about 650 to 770 million metric tons of carbon annually, which is more than Canada’s total yearly emissions.
The revenue generation is equally significant. The coalition would raise nearly $200 billion per year, with most funds coming from domestic carbon pricing rather than border fees. These funds could be used to support clean energy projects, social programs, or help countries adapt to the impacts of climate change.
Brazil has already put this proposal on its agenda for the November summit and organized technical meetings with potential partner countries. The timing matters because many nations are already introducing carbon pricing systems, making coordination more practical now than in the past.
The researchers tested two main approaches. The first uses one uniform carbon price of $50 per ton for all member countries. The second uses a graduated system where prices vary by income level: $25 per ton for low-income countries, $50 for middle-income nations, and $75 for high-income countries.
Both approaches yield similar emissions cuts but differ in their impact on poorer nations. The graduated price system may be more politically acceptable for developing countries. It also results in smaller impacts on their industrial output.
The price increases for consumers would be manageable. Steel prices would rise 4% to 6%, aluminum by 11% to 15%, and fertilizer by 10% to 13% compared to current policies. These are the prices for raw materials. When these materials get used in final products like cars or buildings, the price increase consumers see is much smaller.
Industrial output in member countries of the carbon pricing coalition would barely change. The production of steel, aluminum, cement, and fertilizers would decrease by less than 2% for countries in the coalition. This suggests companies wouldn’t flee to countries without carbon pricing, which is a common worry.
The proposal builds on existing momentum, with 80 carbon pricing systems now operating across 50 countries worldwide, covering about 28% of global emissions and generating over $100 billion in revenue in 2024. All major middle-income countries have either initiated carbon pricing or are actively planning to do so.
The potential membership list includes major emitters. Countries like Australia, Brazil, Canada, China, India, Indonesia, and Thailand could be early participants. The researchers also included several African nations that produce relatively clean industrial products and could benefit from the system.
For poorer countries, the coalition would offer more than just flexible pricing. Member nations could provide technology transfers, training, and financial support. Some of the carbon pricing revenue could fund trust funds at development banks to help these countries afford clean technology projects.
The plan addresses a key weakness in current climate policy. Currently, the benefits of reducing emissions are shared globally, but individual countries bear the costs. This creates an incentive for countries to wait for others to act first. The coalition structure changes this by making participation economically attractive.
There are challenges to overcome. Countries would need to verify emissions and ensure others are meeting their commitments. The plan calls for transparent reporting systems. Member countries would report industry-level data, while companies in non-member countries would need to provide detailed information for border fee calculations.
The proposal also considers allowing high-quality carbon offsets from forest conservation or carbon removal projects. This could help countries like Brazil and Indonesia leverage their natural resources while generating private investment in climate action. However, the researchers stress that any offset system needs strict quality controls to maintain credibility.
Political acceptance can be challenging in certain areas. The graduated pricing system acknowledges that poorer countries have a lesser responsibility for historical emissions and a limited capacity to transition to clean production. This principle of “common but differentiated responsibilities” is already established in international climate agreements.
The alternative to this coordinated carbon pricing coalition approach is messier. Without cooperation, countries will likely create their own patchwork of border fees and compliance standards. This would complicate trade, increase costs for businesses, and result in fewer overall emissions reductions.
The European Union has already started implementing its own border carbon fee system. This has prompted responses from other countries and sparked debates about fairness, particularly regarding impacts on developing nations. The coalition approach aims to address these concerns through broader participation and built-in support for less wealthy countries.
Transparency will be critical for building trust. The system would require independent verification that members are keeping their promises and that border fees are calculated correctly. This means investing in monitoring systems and training people to verify emissions data.
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The researchers used detailed plant-level data from nearly 3,500 facilities worldwide to model the outcomes. Their analysis examined how producers would respond to carbon prices, how trade patterns would change, and what would happen to prices and production levels.
For this to become a reality, finance and trade ministries in potential member countries would need to coordinate their efforts. International organizations and the private sector would also play important roles. Support from Brazil and future summit hosts could help create political momentum for countries to engage seriously with the proposal.
The carbon pricing coalition framework is designed to grow over time. It would start with four major industries and a core group of committed countries, then expand to cover more sectors and welcome additional members as the system proves its worth.
