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Climate payments: A Coase theorem

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  • Dutta, Prajit K.
  • Radner, Roy

Abstract

Climate-related payments have emerged as a contentious and complex issue in climate negotiations. Major questions remain on how this will be done and how effective payments will be. The paper studies transfers under a variety of timing possibilities. It is shown that outcome-contingent payments always lead to efficiency and a particular alignment of transfer and emission timings implies that the efficient equilibrium is the only equilibrium even when the horizon is infinite. The theoretical novelty is a multi-lateral Coase Theorem in a dynamic model. The policy prescription is for an enhanced role for transfers to solve the climate problem.

Suggested Citation

  • Dutta, Prajit K. & Radner, Roy, 2025. "Climate payments: A Coase theorem," Journal of Economic Theory, Elsevier, vol. 228(C).
    • Handle: RePEc:eee:jetheo:v:228:y:2025:i:c:s002205312500078x
    DOI: 10.1016/j.jet.2025.106032
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