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The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund

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  • Richard S.J. Tol

    (Hamburg University, Vrije Universiteit and Carnegie Mellon University)

Abstract

I compare and contrast five climate scenarios: (1) no climate policy; (2) non-cooperative cost-benefit analysis (NC CBA); (3) NC CBA with international permit trade; (4) NC CBA with joint and several liability for climate change damages; and (5) NC CBA with liability proportional to a country’s share in cumulative emissions. As estimates of the marginal damage costs are low, standard NC CBA implies only limited emission abatement. With international permit trade, emission abatement is even less, as the carbon tax is reduced in countries with fast-growing emissions, and because a permit market ignores the positive, dynamic externalities of abatement. Proportional liability shifts abatement effort towards the richer countries, but away from the fast-growing economies; again, long-term, global emission abatement is reduced. Joint and several liability would lead to more stringent climate policy. These findings are qualitatively robust to the size and accounting of climate change impacts, to the definition of liability, and to the baseline scenario

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.88.

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Date of creation: Jun 2006
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Handle: RePEc:fem:femwpa:2006.88

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Keywords: Climate Change; Cost-benefit Analysis; Liability; Permit Trade;

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References

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Cited by:
  1. David Anthoff & Richard S.J. Tol, 2007. "On International Equity Weights and National Decision Making on Climate Change," Working Papers 2007.55, Fondazione Eni Enrico Mattei.
  2. Rob Dellink & Michel den Elzen & Harry Aiking & Emmy Bergsma & Frans Berkhout & Thijs Dekker & Joyeeta Gupta, 2009. "Sharing the Burden of Adaptation Financing: An Assessment of the Contributions of Countries," Working Papers 2009.59, Fondazione Eni Enrico Mattei.

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