The Climate Stabilization Fund – Global Auctioning
of Emission Allowances to help Forests and People
Michael Dutschke, biocarbon consult1
Abstract
The initial research interest in the layout of this paper was to secure sufficient finance for
reducing emissions from deforestation and degradation in developing (REDD) countries un-
der the UN Framework Convention on Climate Change (UNFCCC). After analyzing the inter-
est groups involved in the REDD discussion, the author proposes a Climate Stabilization
Fund, based on proceeds of an international allowance auction. The auction-based model
proposed fulfils a whole variety of goals besides providing financial proceeds, including a
gradual long-term integration of developing countries into shared responsibility for confront-
ing climate change.
1 Scope of an REDD Mechanism
International negotiations actually circle around methodological issues for REDD, like inter-
national leakage, permanence and the determination of national baselines. The author ar-
gues that these are second-order questions, because the basic incentive structure for REDD
remains unclear. The first-order question is a distributional one. A future REDD can be either
participative or non-participative. The degree of participation will have repercussions on
scope and size of a future REDD Mechanism. Only once these can be assessed, second-
order methodological questions can be answered.
Participative REDD Mechanism: An all-in approach will be the first-best option. It will be
most effective, because emissions and uptakes will be accounted across different country
situations. A participative mechanism will also be most carbon efficient, because it will offer
most supply transparency. Under this option, cross-border carbon leakage will not occur,
because emissions are accounted for wherever they occur. As long as any form of compen-
sation for carbon services are involved, baselines will remain an issue. Monitoring will be
most cost-efficient on a large scale, because the increased d