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Price is a Better Climate Commitment

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Abstract

Developing countries justifiably reject meaningful emission targets. This prevents the Kyoto Protocol from establishing a global price for greenhouse gas emissions, and leaves almost all new emissions unpriced. This paper proposes a new pair of commitments—a commitment to a binding carbon-price target and to a Green Fund financed by a form of carbon pricing. The result is global carbon pricing that neither requires developing countries to accept emission caps nor requires industrial countries to accept carbon taxes. The cost of complying with these commitments is subject to far less risk than the cost of an emissions cap, and the combined cost of a $30/ton price target and the Green Fund is only 23 cents per person per day for the United States and is negative for India. The combined advantages should significantly increase the chance that developing countries will commit to a substantial carbon price, and this should increase the chance of cap and trade passing the U.S. Senate.

Suggested Citation

  • Peter Cramton & Steven Stoft, 2010. "Price is a Better Climate Commitment," Papers of Peter Cramton 10pbcc, University of Maryland, Department of Economics - Peter Cramton, revised 2010.
  • Handle: RePEc:pcc:pccumd:10pbcc
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    File URL: http://www.cramton.umd.edu/papers2010-2014/cramton-stoft-price-is-a-better-climate-commitment.pdf
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    Cited by:

    1. Holtsmark, Bjart & Sommervoll, Dag Einar, 2012. "International emissions trading: Good or bad?," Economics Letters, Elsevier, vol. 117(1), pages 362-364.
    2. repec:wsi:ccexxx:v:04:y:2013:i:02:n:s201000781350005x is not listed on IDEAS
    3. Peter Cramton & Steven Stoft, 2010. "International Climate Games: From Caps to Cooperation," Papers of Peter Cramton 10icg, University of Maryland, Department of Economics - Peter Cramton, revised 2010.
    4. Williams, Roberton C., 2012. "Growing state–federal conflicts in environmental policy: The role of market-based regulation," Journal of Public Economics, Elsevier, vol. 96(11), pages 1092-1099.
    5. Bjart Holtsmark & Dag Einar Sommervoll, 2012. "International emissions trading in a noncooperative climate policy game," Discussion Papers 693, Statistics Norway, Research Department.

    More about this item

    Keywords

    Climate change; carbon pricing; cap and trade; carbon auctions;

    JEL classification:

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

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