The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund
AbstractI 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 InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.88.
Date of creation: Jun 2006
Date of revision:
Climate Change; Cost-benefit Analysis; Liability; Permit Trade;
Other versions of this item:
- Richard S.J. Tol, 2006. "The Polluter Pays Principle And Cost-Benefit Analysis Of Climate Change: An Application Of Fund," Working Papers FNU-98, Research unit Sustainability and Global Change, Hamburg University, revised Feb 2006.
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-05 (All new papers)
- NEP-ENE-2006-08-05 (Energy Economics)
- NEP-ENV-2006-08-05 (Environmental Economics)
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