Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?
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).
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bosetti, Valentina & Frankel, Jeffrey A., 2012.
"Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission Targets,"
Working Paper Series
rwp12-012, Harvard University, John F. Kennedy School of Government.
- 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 1450006-1-1.
- Bosetti, Valentina & Frankel, Jeffrey A., 2012. "Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission Targets," Scholarly Articles 8694933, Harvard Kennedy School of Government.
- Weitzman, Martin L, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Wiley Blackwell, vol. 41(4), pages 477-91, October.
- Barrett, Scott, 2005. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," OUP Catalogue, Oxford University Press, number 9780199286096, March.
- 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.
- Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
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: ()
If references are entirely missing, you can add them using this form.