A Market-Based Approach to Carbon Pricing
A new preprint, (Private)-Retroactive Carbon Pricing [(P)ReCaP]: A Market-based Approach for Climate Finance and Risk Assessment, is up on arXiv.
It is joint work with Yoshua Bengio, Prateek Gupta, Dylan Radovic, Andrew Williams, Christian Schroeder de Witt, Tianyu Zhang, and Yang Zhang. The Social Cost of Carbon is estimated once and rarely corrected, so today’s prices ignore tomorrow’s evidence. We propose updating it retroactively as that evidence accumulates, letting polluters and insurers settle the difference, and using a prediction market to price the remaining uncertainty.
The mechanism and its analysis are in the paper.