IDEAS home Printed from
   My bibliography  Save this paper

Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?


  • Martin Weitzman


Thus far, most approaches to resolving the global warming externality have been quantity based. With n different national entities, a meaningful comprehensive treaty involves negotiating n different binding emissions quotas (whether tradeable or not). In post-Kyoto practice this n-dimensional coordination problem has proven intractable and has essentially devolved into sporadic regional volunteerism. By contrast, on the price side there is a natural one-dimensional focus on negotiating a single binding carbon price, the proceeds from which are domestically retained. Significantly (and unlike negotiated quantities) the negotiated uniform price on carbon emissions embodies an automatic "countervailing force" against free-riding self interest by incentivizing agents to internalize the externality. The model of this paper indicates an exact sense in which each agent's extra cost from a higher emissions price is counter-balanced by that agent's extra benefit from inducing (via the higher emissions price) all other agents to simultaneously lower their emissions. With some further restrictions, the theoretical model shows that population-weighted majority rule for a uniform price on carbon emissions can come as close to global efficiency as the median marginal benefit (per capita) is close to the mean marginal benefit (per capita).

Suggested Citation

  • Martin Weitzman, 2013. "Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?," NBER Working Papers 19644, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19644
    Note: EEE

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
    2. Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
    3. Valentina Bosetti & Jeffrey Frankel, 2014. "Sustainable Cooperation In Global Climate Policy: Specific Formulas And Emission Targets," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-34.
    4. Geir Asheim, 2013. "A Distributional Argument for Supply-Side Climate Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 239-254, October.
    5. Lawrence H. Goulder & Andrew Schein, 2013. "Carbon Taxes vs. Cap and Trade: A Critical Review," NBER Working Papers 19338, National Bureau of Economic Research, Inc.
    6. Barrett, Scott, 2005. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," OUP Catalogue, Oxford University Press, number 9780199286096.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19644. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.